At the start of 2019 Spain’s economic data are clearly positive. GDP grew 0.6% in the third quarter of 2018 and is expected to maintain that rhythm in the final quarter. Annual growth last year will this have been of the order of 2.4% and the government´s forecast for this year, adjusted downward because of the global tendency towards a slowdown, is 2.2%. 545,000 jobs were created in 2018, 3% more, and the latest known private forecast, from Manpower Group, is that this year 404,000 jobs will be created, 2.1% more. It is not just not bad. It is very good.
But there are not many smiles on the front pages of the Spanish press. Nor in the international press. The climate is not optimistic. Because of the fear that the mild global slowdown could end up being a recession – or even a crisis – because the serious problems of high public debt levels has barely improved despite coming out of the crisis and because political instability could prevent adequate measures being adopted if the economy turns. And because although the economy continues to do well there are days when the tensions can hide it.
2019 is election year. What is certain is that there will be municipal and European elections in May, as well as regional elections in much of Spain. And there could be a general election at any moment, at the latest early in 2020. And an election year is not the best time for taking economic measures which, although necessary, would not please the electorate.
But the panorama is complicated because the Sanchez government does not have a majority and it is still not known if he will be able to get the 2019 budget approved. Moreover the polls suggest that it is unlikely that the political impasse (the lack of parliamentary majority) will improve after the elections. And the possible outcomes that can be identified – continuity of the Sanchez government with the support of Podemos, the Basque Nationalist Party (PNV) and the Catalan separatists, or a government of the three right wing parties (PP, Ciudadanos and Vox) which is being tried in Andalucia – generate nervousness and do not encourage optimism.
The consequence is that in recent months economic and political confidence has declined, which is not positive. After the investiture of the new Sanchez government in June, both indices (measured monthly by CIS, and which vary between 0 and 100) moved upwards. The economic confidence index improved from 41.9 in May to 42.8 and 42.9 in June and July, and the political confidence index recovered even more, from 30.6 to 37.3 and 37.6. However, after the major increase in tension at the beginning of autumn both indices have fallen again, to 38.9 and 31.6 and in December were 9% and 2% below their levels of a year before. And the Consumer Confidence Index, more relevant for the economy, has had an annual average of 98.3, below the 100 which marks the boundary of positive territory, and 4% below 2017.
Most worrying is that political instability is not just a Spanish phenomenon, but that we are slightly less badly off than other European countries, like Italy with a coalition between the populist right of Salvini and the populist left, or Great Britain, where no-one knows what will happen with Brexit. In this context the May’s European elections are a major unknown and the most likely outcome is that the three traditional parliamentary groups (popular or Christian Democrat, socialist and liberal) will be threatened by a populist group of the far right led by the Italians of Salvini and the French of Marine Le Pen. And after the elections they have to proceed to the election of a new President of the Council of Ministers (currently the popular Donald Tusk) and the President of the European Commission (Jean-Claude Juncker). Who will replace them? Will the European Union pass, because of the greater influence of nationalist populism, from the current difficulties to paralysis or, even, a step backwards?
On the other hand, Mario Draghi – who contributed decisively to saving the Euro in 2012 – ends his mandate as President of the ECB and must be replaced. The name of the new ECB president is still unknown and the relative weakness of Angela Merkel’s leadership in Germany could complicate the never easy relations between the two central banks based in Frankfurt, the Bundesbank and the ECB.
Moreover, the global economy has to overcome the progressive withdrawal of the medication – injections of liquidity and minimal interest rates – which all central banks dispensed with such generosity after 2008 to avoid the grave international economic crisis – the worst since 1929 – having the serious consequences of the 1929 crisis: massive unemployment, serious loss of the population’s purchasing power , the rise of Nazism to power in Germany and, finally, the world war.
We are far from the climate of the thirties in the 20th century, but the increase in nationalist populism is worrying. Especially in the US, where Trump has lost the elections to the House of Representatives and precisely because of this – feeling under attack, could be tempted to have recourse to more dangerous initiatives. The trade war with China, the partial closure of the American government until the Democrats concede the funds the build a wall with Mexico, the irresponsible attacks on the new Chairman of the Federal Reserve, who Trump himself had just appointed. And then the removal of the generals who at the head of the armed forces or as heads in the White House moderated his international extravagances, like the announcement of the military withdrawal from Syria, do not encourage any optimism.
Many Catalans and Spaniards are concerned or even indignant because the presidency of the Generalitat (Catalan government) is occupied by someone who does not seem to see reality and who politically seems to lack balance. But Torra is much more discreet than Trump, his military power is reduced to the Catalan police and his mistakes can only damage the 8 million Catalans and the other Spaniards. Trump’s possible mistakes could have much more serious consequences and affect not just a region in southern Europe but the whole planet.
2019 is replete with uncertainties. It something that it would be irresponsible to ignore. But it is also true that unemployment in the European Union has fallen below 8% for the first time since the crisis and that in Spain the number of people affiliated with Social Security has recovered pre-2008 levels.
The worst is a concern which is far (at least for now) from being a reality.