Spain’s slowing economy is becoming the main battleground of a general election called for March 9. Polls show it has become the top issue for voters, who are struggling with higher mortgages, fuel and food bills, and who are worried about losing their jobs this year.
Spain has one of the highest rates of temporary employment in Europe, with about 30 per cent of employees on short-term contracts.
One poll on Cadena Ser, the leading radio network in Spain, showed that 70 per cent of Spaniards were struggling to make ends meet. Still, a majority of respondents thought the economic slowdown would be temporary.
The international credit squeeze is hurting an economy that ran on credit – exemplified by a current account deficit of close to 10 per cent of gross domestic product. Bank of Spain figures show the external deficit reached €85bn ($125bn, £64bn) in the first 10 months of last year, which makes it the second largest in the world after the US.
Pedro Solbes, finance minister, admits it will become more “complicated” for Spain to access foreign capital if the credit crunch does not ease in 2008.
Most economic forecasts, including those of the International Monetary Fund, the Organisation for Economic Co-operation and Development and private banks, put Spanish growth at well below 3 per cent in 2008.
But with an election looming, Mr Solbes is accentuating the positive. He predicts the economy will grow by 3.1 per cent this year, respectable in European terms although a sharp drop from the estimated 3.7 per cent growth in 2007.
Moreover, Mr Solbes says the Socialist government has a “comfortable” fiscal cushion of 2 per cent of GDP to finance tax cuts and other measures to pump prime the economy.
The opposition conservative Popular party has also decided to fight the election over the economy.
It aims to win over undecided voters with promises of big tax cuts for working women and low-income groups, and lower corporate taxation. The Popular party this week recruited Manuel Pizarro, a well-known businessman, as its future finance minister if the party wins the March elections.
Mr Pizarro, a former chairman of Endesa, Spain’s largest utility, fought a spirited battle against a takeover bid by Gas Natural, which rapidly became a battle against the Socialist government.
