Zapatero’s policies likely to be kept

Leaders of Spain’s Popular party (PP), the rightwing opposition, cannot hide their impatience to run the country again after what they see as the disaster of seven years under José Luis Rodríguez Zapatero, the Socialist prime minister.

But the eurozone sovereign debt crisis has now pushed the Spanish economy into such a tight corner that Mariano Rajoy, the PP leader, knows that even if he wins the November 20 election as expected, he will probably have to enforce much of the same unpopular policies as those implemented by Mr Zapatero.

In an interview with Europa Press, Mr Rajoy said on Sunday that his election campaign would consist mainly of telling Spaniards the truth, “that we are in a very difficult situation, that tough times are coming and that we are all going to have to tighten our belts”.

Mr Zapatero has been issuing similar warnings for more than a year, although he was slow to acknowledge the gravity of the crisis as it deepened in 2008 and 2009. He looks set to pay the price at the ballot box for his excessive optimism and the painful austerity that followed.

The latest opinion poll, published in the ABC newspaper on Sunday, shows the PP winning 47.6 per cent of the vote – which would probably give them an absolute majority in parliament – against 35 per cent for the Socialists, even though Mr Zapatero has stood down as the party’s candidate in favour of Alfredo Pérez Rubalcaba, his relatively popular former interior minister.

PP leaders insist they will run the economy with greater competence and rigour than the Socialists. Among other changes, they are likely to do more to liberalise the labour market and enforce spending cuts by Spain’s 17 autonomous regions.

They are unlikely, however, to attempt more than cosmetic improvements to the country’s already ambitious deficit targets.

Elena Salgado, finance minister, intends to cut the budget deficit to 6 per cent of gross domestic product this year and to 3 per cent of GDP by 2013, down from 11.1 per cent at its peak in 2009. Last week Ms Salgado said Spain was “determined to deepen reforms” and would fulfil its deficit promises.

Spain is struggling to restore its fiscal credibility through spending cuts at the same time as restoring economic growth – no easy task when the easiest way to boost growth in the short term is for the public sector to spend more. Without growth tax revenues tend to fall, which in turns increases the deficit.

On Friday, the Bank of Spain estimated that the economy had grown just 0.2 per cent in the second quarter compared with the previous quarter, giving a year-on-year growth rate of 0.7 per cent.

These figures made the official 2011 growth target of 1.3 per cent “impossible”, according to Raj Badiani, economist at IHS Global Insight. “This will hamper the government’s ability to deliver its budget deficit reduction targets,” he said.

Capital Economics takes a similar gloomy view of the growth prospects of both Spain and Italy, predicting only 0.5 per cent growth for each this year and stagnation in 2012.

“Not only does this suggest that both governments will struggle to meet their deficit reduction goals without additional austerity measures, it also implies that they may eventually have to restructure their debts,” it said.