Lights and shades of Rajoy’s two years as Spain’s president

The day in which the current Spanish government took office, Luis De Guindos, just designated as Minister of Economy, admitted that his predecessor, Elena Salgado, had got the short end of the stick, in reference to the inevitably bad effects of the ecomomic crisis she had had to manage. The minister’s comment also gave an idea of the Herculean task he had ahead: reorganising the Spanish banking sector and fight against the overwhelming reality of unemployment and public debt. Now two years long have passed.

Spain’s financial entities have cleaned up their balancesheets thanks to the €100,000 million credit line opened by Brussels, of which only €54,000 million have been used. Four banks have been nationalised, the same number have been involved in concentration processes, and a bad bank has been born. Rajoy’s government considers the financial reorganisation as one of great sucess of the last two years because of its positive impact on the balance of payments figures. During the years of credit expansion, the Spanish deficit reached to 10% of GDP (about € 100,000 million), while Spain will register an external surplus of 1.9% in 2013. It means not only that Spain does not need financing from the markets anymore, but also that the country’s economy has enough financing capacity amounting €19,000 million. Anyway, the figures are not enough to deflate the giant external debt bubble created in the boom years.

The international investment position ( the difference between what Spain invests on foreign markets and what Spain borrows from them) is still at 90% of GDP, almost three times of international institutions recommendations, and consequently companies and families will suffer a long process of deleveraging and low comsumption. The good news is that small and medium companies as well as big ones have bet on exports. According to figures published on Thursday, Spanish exports have increased by 6,8% in the first nine months of 2013, reaching a new record high of € 175,143 millions, the highest level since 1971, when Spain starts registering statistical data. So, Mr. Rajoy can chalk up it as another success for his cabinet.

The foreign investments has grown significantly as well. Between January and August Spain has received a flow of € 18,757 million, doubling last year number in the same period. It is still under the registers in boom years, but it reflects the shift in Spain’s external perception.

All of these explains the plummeting of Spain’s risk premium. One week before Rajoy winned elections, the indicator recorded over 500 basis points, one week after it stood around 470. Now the country’s risk premium nears to 230. Just the half.

However, when Luis De Guindos said the former Spanish economy minister that she had suffered the worst part of the crisis, he was also including unemployment and public debt.Unfortunately, both are still the most controversial issues for Mariano Rajoy’s goverment because they maintain unresolved, and what is worst, increasing.

From November 2011 to current November, Spain has one million more of jobless people, according to the last Labour Force Survey (EPA , in its Spanish acronym), and beaten unemployment records over 6 million people. The historical figures reach 26% against the 22.8% Rajoy found when taking office. Furthermore, the first fall of workforce in times of democracy has been registered, and about 400,000 Spaniards have left the country searching for new job opportunities. If considering youth unemployment, Eurostat appointed that it have grown from 48.9 % in 2011 to 56.5% two years later. An increase of 7.6%.

On the other hand, public debt has not reduced either. The deficit stands currently at 94.2% of GDP, including the costs of financial rescue, which means 25 percentual points over Rajoy’s coming.

Spain is well perceived from the outside but not from the inside. The country’s international position has improved since Rajoy is president, but Spanish people is increasingly suffering cuts. Better or worse than two years ago? Mariano Rajoy thanked Spanish people for their “efforts” to celebrate his second run.

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