Spain: numbers show optimism yet political tension grows

Spain’s PM Mariano Rajoy has changed his holiday plans. He won’t spend time in his own apartment at Sanxenxo beach, in Spain’s Galice, this year. Instead, he and his family have rented a villa with a sea view, but far from the public eye, where he can minimize the risk of angry citizens knocking on his door.

Mr Rajoy has recently come under a strong pressure because of the so-called Bárcenas case, the scandal involving allegations of illegal donations to the Popular Party (PP) leaders over two decades. Luis Bárcenas, the party’s treasurer currently in preventive custody in a Madrid’s prison, was arrested in June and charged with bribery, money laundering, tax fraud and other crimes.

Mr Rajoy, who has denied any wrongdoing, had been using his political majority to avoid appearing in parliament, but last week opposition parties threatened him to table a motion of censure if he refused to explain his connection to this case. Finally he agreed to do so at the end of August.

While political tension is escalating, markets remain quiet because the last numbers are showing the end of the tunnel. Spain should manage a return to a slight growth next year, while Greece might escape a six-year depression in 2014, according to a recent survey by Reuters.

The government is hammering with ‘the-worst-is-over’ messages: the Bank of Spain sees recession slowing (GDP shrank by just 0.1% in the last three months, a much smaller contraction than the 0.5% drop in the first quarter of this year). But the Spaniards are tired of austerity and budget cuts and many think the economy is the same or even worse than last year’s. The crisis has created huge imbalances: almost 28% of unemployment, domestic consumption remains too weak and the housing market values are among the weakest in Europe. Exports are currently the only growth engine.

It won’t be an easy summer for Mr. Rajoy. No drinks at Sanxenxo’s nautic club where he likes to hang out. He will not indulge at the Galician beaches nor attend the famous Pontevedra casino ball. No matter the moderate optimism of macroeconomics, he is aware of being in the eye of the hurricane: any backlash may jeopardize his bid for re-election in 2015.