The extreme left-wing manifesto issued by the Podemos-IU coalition aims, in earnest, to completely change Spain. And it would endow it with a Third World country status. By promising to secure a minimum income close to the current average wage, who on earth would put up with the hardship of working all day long?
The Spanish Parliament’s Chairman, Mr. López, has bitterly announced that failure to guarantee a coalition government will involve new elections in late June, warning of citizens deep frustration with parties’ inability to reach an agreement. But resorting to fresh elections seems a better prospect than forming a government which is hostage to the extremist policies of the Podemos movement.
The IMF forecasts a slowdown in world growth this year. GDP will barely exceed the 3% recession frontier. As usual, it has also cut its 2017 estimate, now running at 3.5%. Unless governments agree on unspecified action, this scenario points to long-term underperformance and virtual stagnation, much in line with Larry Summers’s underlying views.
In the select club of central bankers it’s fashionable to play around with the idea of negative interest rates. Sweden’s central bank became the standard bearer for this new trend.
Spain overran its deficit goal by one full percentage point last year. While the caretaker government puts the blame on regions under opposition control, such as Catalonia and Valencia, rival parties adamantly attack its budgetary record.
Everywhere in the Western world, the political debate is becoming increasingly toxic. Just attend a Donald Trump meeting to get acquainted with politics grounded on ludicrous nonsense and scornfully abusive remarks towards women, migrants and Muslims. Not to mention how shamefully he upgrades the Ku Klux Klan, portraying it as a respectful club.
Both main central banks face a challenging outlook. The ECB may have saved the day recently by showing it still commands enough firepower to support the economy, even if its room for manoeuvre seems hopelessly narrow. The Federal Reserve seems caught in a nasty trap.
Mario Draghi surprised the markets with a bold move no one expected. That said, he openly conceded his margin for manoeuvre was running out. In a sincere confession few central bankers would indulge in, Draghi acknowledged there was little room for ECB’s extra rate cuts.
The utterly preposterous policy platform submitted by Podemos leaves no room for a left-wing grand coalition in Spain. Its reckless recipes are only aimed at frustrating any hope the Socialist leader might have of forming a cabinet. With everyone manoeuvring to achieve pole position, no serious negotiations can take place on alliances which could lead to the formation of a cabinet. So voters will probably have the chance for a second say just before the summer break.
Markets around the world are turning bearish. An understandable move as investors are confronted with dismal global growth prospects. Emerging countries face a rather gloomy outlook and even the most developed regions do not escape this uninspiring scenario. Europe’s recovery lags behind, as usual, while US growth loses momentum.