When Mariano Rajoy was elected prime minister of Spain last autumn, it looked like a silver lining had appeared in the dark clouds over the eurozone. Despite his repeated support for austerity, Mr Rajoy had sent the people of Spain a message of hope for the future. His big election win suggested significant popular support for his reform agenda.
Five months on, this sense of hopefulness has all but disappeared in Madrid. With unemployment approaching 25 per cent and yields on 10-year bond rates stuck near 6 per cent, politicians’ rhetoric has changed too. Speaking on the radio this week, the foreign minister, José Manuel García-Margallo, admitted the government’s near-despair when he said that “Spain is undergoing a crisis of enormous proportions”.
It would be wrong to attribute this change of sentiment to failings by Mr Rajoy and his government. True, the budget for 2012 could have been designed better. It was also unwise to postpone it for weeks in the hope of winning a regional election. But Madrid has taken fiscal consolidation seriously. Significant labour and banking reforms have been accompanied by a laudable attempt at reining in spending by the country’s regions.
The truth is, Mr Rajoy finds himself in an impossible situation. For all the talk of European solidarity, the EU has insisted that his deficit-reduction plan should proceed at an excessive pace. This was bound to trigger a popular backlash. Support for the ruling Popular party fell by more than eight percentage points in the past month from 46.3 per cent to 38.1 per cent.
Such trends are not limited to Spain. In Italy, austerity is biting into the popularity of Mario Monti’s technocratic administration. Excessive fiscal restraint has also begun to weigh on Europe’s core. The Dutch government fell after failing to win support for tax rises and cuts in spending, though a new coalition this week approved a tough new budget.
It is, nevertheless, encouraging that this week some politicians and the president of the European Central Bank, Mario Draghi, put more emphasis on how to revive the economy. But while calls for growth are gathering momentum, there is still little agreement on the exact prescriptions that will get the continent back in shape. The illusion is still strong that Europe can be revived without addressing problems such as the longstanding current-account imbalances.
Without broader European support – read Germany – the reformist drive of Mr Rajoy and his colleagues in the periphery are bound to fail. Citizens may have been favourable to their initial message of austerity for a higher cause, but they will not tolerate being led into a dead-end.
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