Reforms Betrayed? Zapatero and Continuities in Economic Policy

Abstract

While this issue assesses whether the Socialists' policies under Zapatero depart from previous administrations, this contribution will claim that in the economic policy realm there has been remarkable continuity. Indeed, it is hard to talk of a ‘second transition’ in the economic policy realm. This continuity is explained by ideological/programmatic considerations (fiscal consolidation has been adopted as a mantra by both parties), personnel continuities and stability in the top tier of economic policymaking, the economic constraints imposed by European Union membership, and by the decision to implement major reforms with the participation of the social actors.

Keywords:

• Spain
• Economic Policies
• Economic Reforms
• Economic Transition
• Zapatero Government

Notes

[1] Data are taken from the OECD World Economic Outlook, various years.

[2] Financial Times, ‘Immigrants boost British and Spanish economies’, 20 February 2007.

[3] The Spanish economy also benefited from a favorable conversion rate of the peseta vis-à-vis the euro. The national currency was fixed to the euro at the end of 1998 at a rate of 166 Spanish pesetas to one euro.

[4] There is also consensus on the important role that technocrats (the ‘economic technopols’ and trinitarios) from the Ministry of Commerce, the Bank of Spain, of the Ministry of Foreign Relations (or the Ministry of Relations with Europe) have played in economic policy stability since the transition (De la Dehesa 1994, pp. 139–140). Trinitarios refers to people who worked at the Palacio de la Trinidad in Madrid, where the Ministry of European Affairs (later secretariat of state) was located.

[5] The decision to support the budget stability act was a surprise and a sign of Solbes's clout in the new government. The PSOE had objected strenuously to this law while it was in opposition and had gone as far as to challenge its constitutionality in court, supporting the challenge presented by regional governments where the party was in power. Solbes, a fervent supporter of balanced budgets and a zero deficit during the cycle, refused to follow the party line. It was only the agreement with Esquerra Republicana de Catalunya (ERC, Republican Left of Catalonia) in June of 2004 which led the government to make changes to the law in 2006. In exchange for ERC's support for the budget, the government agreed to avoid a budget surplus in 2006 and 2007.

[6] Strike data are from the Ministry of Labour's Labour Statistics, various years.

[7] For instance, Guitart (2008) points out, ‘The share of wages in national income reached in 2006 a historic level of 46.4 per cent of GDP, or a fall of 3.2 points in ten years; the operating surplus increased by 0.2 per cent to 45.1 per cent and net taxes on production and imports, essentially borne by the workers increased by 2.9 per cent to 11.5 per cent. On the other hand taxation represented in 2007 41 per cent of GDP, or four points below the European average. The 35 biggest Spanish companies registered profits of 24,508 million Euros in the first quarter of 2007.’

[8] The Economist, ‘The party's over’, 8 November 2008 (a special report).