In yesterday's editorial, El Pais first enthusiastically supports the shock doctrine:
Yep, we know the answer. Freeze pensions, cut public employees' wages and talk about removing benefits for the long-term unemployed. Give up infrastructure investment (and delay current projects by one year, which probably means spending on now half-finished work will become wasted) and do not tax the rich (or real estate).
And, if neoliberal shock doctrine were not enough, here's a helping of calling others economically clueless while espousing Hooverite fiscal tightening in a recession.
And this coming from what its critics used to call "the Social Democratic newspaper". Words, again, fail me. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
The only consolation I can offer you is that the absolute sums seem small in comparison to the size of the Spanish economy and a .5% reduction in GDP is tiny compared to the 9% of GDP equivalent which has been taken out of the Irish economy by the Irish Government here (and with the EU Commission threatening that more will be needed). Even the Caja bail-out is tiny by Irish standards with a small business bank like Anglo-Irish bank likely to cost taxpayers a cool 30 Billion for no particular public policy reason.
Given my impression that Zapatero is generally relatively progressive, my (most hopeful) conclusion would be that he thinks that a small symbolic retrenchment now will head of the need for a more dramatic retrenchment later even if at the cost of conceding some ground to neo-liberal shock doctrine ideology. The problem is that one bite rarely satisfies the blood suckers, and once you give them the taste of blood they keep coming back for more.
So it becomes a question of where does Zapatero think he is going to be able to draw the line. If this is it, and there is no further retrenchment/bail-out, then Spain could be getting off very lightly indeed. If the Eurozone as a whole can reverse this momentum through some variant of the Merkel Market Mayhem Mitigation Measures we could even see the EU leading the process of Global financial reform, although I don't see how this can be done without a Tobin Tax, and that isn't even included in Obama's signature Wall Street Reform and Consumer Protection Act of 2009
Being very optimistic for a moment, perhaps Zapatero can use this relatively minimal fiscal retrenchment to pivot onto some serious market reform measures... Frank's Home Page and Diary Index
I find the 0,5% GDP loss estimate laughable. It will be much more. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
That he's afraid is clear from the claim that he said he didn't want to be seen as demagogical.
But there's another "explanation" that better fits the facts: Zapatero is clueless.
Germany has the upper hand now and they are strengthening the Growth and Stability (Suicide) Pact mechanisms to enforce fiscal austerity at the wrong time (the economy is not out of recession yet!). I don't care about Merkel's PR (naked short bans, schmans) while they continue to espouse faulty macroeconomic and monetary policy. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
Zapatero is not your man. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
