In the latest of the Ambassador series, Cormac Ó hEadhra interviews Spain’s Ambassador to Ireland, Javier Garrigues
Spain is not only facing a fiscal and economic crisis - the integrity of the state itself is challenged by forces within Catalonia pushing for independence.
Socially and politically, the establishment is being affronted by the indignados movement. And all the while, the state is hurtling towards further European Union integration at a rate some Spanish people are uneasy about.
But when Spain’s Ambassador talks about the economic difficulties facing his country, it’s impossible not the notice similarities with Ireland.
“Our economy was based on a failed model. We were over dependent on construction. We created a bubble that burst and we are paying the price for it.”
Five million people are unemployed in Spain - 50% of people under-26 do not have jobs. Mr Garrigues says the unemployment problem is a priority for the government while recognising how testing the environment is.
“The situation in Spain is certainly not good. The economy is in trouble, in deep trouble. We’re going through one of the worst crises we can remember.”
Despite this, the Ambassador insists the situation is “not as bad as they seem” and outlines how the unemployment “tragedy” is being targeted by the government.
“All sorts of programmes of education, qualification, training and flexibilisation (sic) of the market which will allow firms to contract young people.”
However, in explaining the high unemployment rate in Spain compared to Ireland, he said “you have the advantage over us of recourse to immigration…which is far easier for the Irish, for the young Irish in particular.”
Spain is implementing a budgetary adjustment of approximately €13bn next year.
It is part of the government’s strategy to “change its economic model” and become more competitive.
“We have a very ambitious strategy…VAT rates have increased, personal income tax is increased as well, unemployment benefits have been streamlined, public sector salaries have been reduced, and public spending has been slashed.”
He said the markets are realising Spain is doing what it needs to do.
But what if there’s a belief Spain is cutting too much or increasing taxes too much? What if consumer sentiment falls further or if more businesses close? What good are the training programmes for the unemployed if jobs are being lost instead of being created, in an atmosphere of austerity?
Mr Garrigues accepts it is a fair question and accepts there are “contradictions” but underlines it is a two-pronged strategy – austerity and structural reform aimed at allowing businesses flourish.
He also points out that Spanish companies are leaders internationally in sectors like infrastructure and the satellite industry among others.
Will Spain request a bailout from the IMF or European Union authorities?
It was a recurring concern even as countries like Ireland, Greece and Portugal fell under market pressure some time ago.
“It’s anybody’s guess. Madrid is weighing the pros and cons of that decision, looking carefully at the conditions that would apply.”
Mr Garrigues said his government is “trying to be clever” about the decision, but will do what’s best for Spain and the eurozone.
While accepting the country has problems he said things are not as negative as is often portrayed – he notes Spanish debt is up to 14% lower than the eurozone average. However, the debt to gross domestic product ratio is projected to increase to over 90% next year.
Spanish authorities say the country’s banks will need approximately €37bn, as opposed to the €100bn initially suggested.
Some fear this is an underestimation, but the Ambassador is not convinced.
“We have the clearest, most transparent photograph of the banking system in the world. No other system has gone through so many stress tests and transparency exercises as Spain.
“The problem was in a way, overblown. There was a panic regarding the Spanish banking system.”
When it is pointed out it took a number of examinations to establish a clear picture of the Irish banking sector and banks’ bad debts may rise as a result of Spain’s austerity programme, the Ambassador doesn’t waver.
“We foresaw there might be a necessity of €100bn, now it is clear that we are not going to need more than €37bn. So it is clear we need much less, it is clear there are not going to be any surprises.’
He adds the sector will be painfully reformed.
“There are conditions with the €37bn. We need to reduce a number of the savings banks; people will be fired and so on, so socially it will be difficult.”
Recent elections in Catalonia did not give the pro-independence Convergència i Unió the “extraordinary majority” (or even an absolute majority) it was looking for.
Artur Mas’ party in fact lost seats and with it, arguably, the impetus needed to push for a referendum.
The Ambassador says it is “difficult to put in black and white who is for and who is against” independence.
When asked if pro-independence parties have a majority in the Catalan parliament, he concedes:
“Mathematically [they] may have, but a very slight majority.”
Mr Garrigues is keen to point out Catalonia is a plural society, in which there are many factors influencing its political reality. He said many Catalans are comfortable with a double identity.
But why not put the issue to the people in a referendum, as is to happen in Scotland?
“We have a democratic government. The first rule for any democratic government is to respect the rule of law. We have a constitution, which has been adopted by democratic means. Over 90% of Catalans voted for the constitution....which does not provide for a referendum.”
This is unlikely to deter the independence movement in Catalonia. However, the executive in Madrid will put forward robust counter-arguments in what is likely to be an ongoing saga.
When asked if Spain is trying to keep Catalonia against the will of its people, the Ambassador rejects the proposition.
“It’s not keeping Catalonia against its will. Spain is Spain as it is. All the regions are there. And we are all there out of free will because we have chosen this constitution…Spain and Catalonia are not different things. Spain without Catalonia is inconceivable, Catalonia without Spain is inconceivable.”
Development of EU
Mr Garrigues makes a number of fundamental points regarding Spain’s relationship with the EU.
He says the Union has been good for Spain. He adds his country wants to stay at the “core of Europe” and do its utmost to help the European project go forward.
He also says it is easy to be critical of the way things were handled since the start of the crisis, but that on balance, much has been achieved.
The Ambassador has however, noticed “an increasing movement of euroscepticism in Spain.” He puts this down to, in part, “the need for more democratic representation in all European institutions.”
As economic, fiscal and political integration is negotiated at European level, he responds positively to an explicit question about the possibility of an EU Minister for Finance:
“Why not? Personally I would be very much for it. That is the way ahead. It will happen sooner or later, it’s a question of time, advancing at a pace that is acceptable for our members.”
He’s optimistic about the future. While acknowledging 2013 will be a difficult year for Spain, he’s hopeful of recovery in 2014.
“We have a very important movement in Spain called the indignados which is a movement , many of whom are young unemployed people who see no future, who don’t feel represented by institutions and who are revolting against this situation. That has to be taken into account. It’s very difficult to do that, but we need to be imaginative and offer citizens possibilities to feel that they are a part, not only of the problem, but of the solution.”
The series continues next Friday with Hungary’s Ambassador to Ireland.