Podemos or Spanish radical’s economics

Pablo Iglesias seems all too conscious that large-scale support may prove short-lived unless he turns the anarchic movement he commands into a broad-based organization. For all his demagogic oratory, he also feels the pressing need to present a coherent policy platform, moving away from his initial utopic views. Focussing on daily scandals provides him with a unique slot to take off. Yet the tide may soon start to turn unless he delivers a fully consistent policy stance.

He is fully aware that further blunders on economic topics will jeopardize his chances of luring middle-of-the-road supporters into his camp. Hence, his eagerness to offer sound pledges. He may find delivery falls short of expectations as moving away from his original mantra will lose support from diehard followers. He also may prove unable to detach himself from some of his the key promises and entrenched policies.

For all these potential shortcomings, he desperately needs to shelve most of his radical credo. None could prove more devastating than his pledge to restructure outstanding debt. Even if he stands a slim chance of winning the elections, should future polls show relentless support, Spain could face another bout of severe instability.

His naïve attempt to conduct a debt audit before restructuring seems wholly misplaced.  The Treasury enters debt commitments on a global basis, regardless of the nature of the underlying expenses. Trying to discriminate between good and bad debt would prove useless and risk igniting a vicious crisis hitting both public and private sectors. The sooner he gets rid of these fantastical ideas, the better for the country.

Pablo Iglesias’ anchored views on debt are based on the wrong assumption. Haircuts would only hit foreign speculators. Yet they are bound to move away long before any real damage is inflicted on them. The likely casualties would be modest savers investing in pension and investment funds- those heavily invested in public debt.

Pledges on the expenditure side seem trivial in comparison. Podemos can safely promise to provide each citizen with one thousand euros per month. As the public chest would prove incapable of covering such slavish amounts, the blame would fall as usual on previous governments. As long as Podemos refrains from reckless action on debt, damage would confine itself to a manageable extent. Otherwise, huge financial turmoil would ensue.

About the Author

JP Marin Arrese
Juan Pedro Marín Arrese is a Madrid-based economic analyst and observer. He regularly publishes articles in the Spanish leading financial newspaper 'Expansión'.

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