Spanish El Pacto – A Syriza Reprise!

I am now back in Australia after a very interesting 2-week visit to Spain. There were several ‘private’ events in that time, and I gave 7 public lectures over 5 days, with travel and meetings in between. It was a hectic week once the public events began, criss-crossing the rather large (by European standards) nation. I learned a lot about grass roots political movements (how they easily splinter as personalities get in the way) and about the state of European politics. I learned little about European economic policy – it is as ridiculous and damaging as ever, yet the ideologues, in the ‘pay’ of the financial and corporate elites, keep claiming everything is on track for recovery. Not! I heard about the ‘ghost’ airport, the unused Formula 1 race track, and saw the massive Arts and Sciences Complex in Valencia, all of which epitomise the excesses in the early years of the Eurozone and the unbridled capacity of Spanish politicians for corruption (the Wiki page doesn’t tell you that several corrupt pollies are already in prison over this project with more to come – see HERE and HERE and ). In the last week, a major development occurred with the signing of the so-called ‘El Pacto’ – Cambiar España: 50 pasos para gobernar juntos – which is an historic agreement between the leaders of Podemos and the United Left (IU) coalition and constitutes the manifesto to ‘Change Spain in 50 steps’ if they win government at the upcoming national election on June 29, 2016. If they don’t win government it will probably squeeze the Socialist party (PSOE) into extinction (which would be good). But ‘El Pacto’ is a dangerous document for the progressive side of politics. This blog explains why. Short summary: Syriza reprise!

The Context

We learned recently that the much-touted recovery in the Eurozone is coming to an end under the weight of continued austerity as the mindless elites continue to deny the reality that spending equals income equals output.

In March, industrial output in Germany fell by 1.3 per cent and in France by 0.3 per cent, indicating that the manufacturing growth engine has gone into reverse.

Eurostat also published retail trade data last week (May 4, 2016) – Volume of retail trade down by 0.5% in euro area – the title being self-explanatory.

The data release reported that:

In March 2016 compared with February 2016, the seasonally adjusted volume of retail trade fell by 0.5% in the euro area (EA19) and by 0.7% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In February the retail trade volume rose by 0.3% in the euro area and remained stable in the EU28.

Interpretation: hopes for a consumer-led recovery are not strong.

This is a sharp downturn in the volume of retail sales after several months of recovery. It looks as though it could be a turning point again.

German retail sales fell by 1.1 per cent, France by -0.7 per cent and in Portugal by -5.2 per cent.

Spain continued to record growth in retail sales but then remember it currently is under the influence of an old-fashioned Keynesian-style fiscal stimulus and the government deficit is 5.2 per cent, well above the threshold allowed under the Stability and Growth Pact.

Moreover, its structural fiscal balance (the component of the total balance that indicates the discretionary policy choices with respect to spending and taxation made by government) has been rising since 2013.

Please read my blog – Spanish government discretionary fiscal deficit rises and real GDP growth returns – for more discussion on this point.

A report in the Daily Telegraph (May 10, 2016) – Eurozone recovery wilts as sugar rush fades, deflation lurks – noted that the factors that were helping growth in the Eurozone last year, including the lower oil prices are “losing … potency, or is turning into a cyclical headwind”.

The article said that:

There are plenty of trouble spots in sight. Italy is struggling to manage a banking crisis as bad debts reach 19pc of lenders’ balance sheets, while Spain and Portugal are both in political turmoil and flouting EU deficit rules – leaving it unclear whether the ECB could legally back them in a crisis under its rescue machinery (OMT).

In the last week, the Greek capital has turned into a riot zone. The UK Guardian article (May 9, 2016)- Greek MPs approve toughest austerity measures yet amid rioting – reports on how the Syriza government of Greece “pushed the legislation through parliament” to change the tax and pension system according to the desires of the occupying forces, aka The Troika.

For several days, “Rioters pelted police with stones while black-clad anarchists lobbed flaming Molotov cocktails”.

The Finance Minister claimed that “Greece could become a ‘failed state’ if it was pushed too far.”

I have news for him – it became a failed state when Syriza caved in to the Troika demands and allowed the ECB to openly blackmail it into accepting the last ‘bailout’ package in June 2015.

The ECB, an institution charged with maintaining financial stability within its jurisduction, deliberately used its currency issuing capacity (in this case by denying liquidity) to bring the Greek banking system to the brink of insolvency as a bargaining tool to force the already compliant Syriza into its large act of bastardry against the Greek people.

And the people are pushing back.

Greek_Riots_May_2016

The latest legislation are:

… seen as the toughest reforms the thrice bailed-out nation has been forced to enact since its debt crisis began. The once firebrand Tsipras called the vote in advance of tortuous bailout negotiations being concluded in a bid to placate eurozone finance ministers ahead of Monday’s meeting.

Tsipras has bent so far over to be part of the Eurozone elite (although I suspect the northerners hold him in contempt – if only because he has proven to be so pitiful) that he no longer can command any respect or credibility and just hangs onto power.

The riots are signalling that the people are now firmly against the government which promised to end austerity but have since imposed even greater austerity than anything the conservatives had been able to impose previously.

Tsipras and his colleagues have clearly double-crossed the people that gave them power. The ultimate treachery really.

Anyone who thinks the primary surplus target of 3.8 per cent of GDP by 2018 is a responsible policy target, in a country that continues to shrink in economic times and has private investment ratios of around 10.3 per cent (in the December-quarter 2015), down from 28.2 per cent in the September-quarter 2007, is suffering from a sociopathological disease, among other ailments.

UI commitment to full employment and anti-austerity

Last week, we launched the Spanish version of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale.

The Spanish translation – Distopía del euro, La. Pensamiento gregario y negación de la realidad – is now for sale.

The back-cover attribution by the Spanish parliamentarian and IU leader Alberto Garzón and his brother, economist Eduardo Garzón, is a summary of their Foreward to the book:

Tenemos frente a nosotros un libro que nos brinda la posibilidad de romper con los viejos y absurdos esquemas mentales que la ideología neoliberal nos ha inoculado hasta la médula. Además nos permite conocer una nueva forma de entender la política fiscal y monetaria. En sí mismo este libro es una formidable herramienta para lograr la transformación social que necesitamos y alcanzar así mayores cotas de bienestar y de justicia económica y social

Which translates to:

Here is a book that gives us the opportunity to break with the old and absurd mindsets that neoliberal ideology has infested us with to the core. It also allows us to learn a new way of understanding fiscal and monetary policy options. In itself this book is a powerful tool for the social transformation we need and thus achieve higher levels of welfare and social and economic justice.

In the more detailed 3-page Foreward the brothers Garzón indicate that those within Europe have been entrapped by the on-going neo-liberal dialogues that have continuously justified the serial errors made by the policy-making elites, such that only an outsider (in this case, me as an Australian) can cut through the hype promoting the ‘European Project’ (“La exposición a este tipo de propaganda, erigida además sobre una simbología identitaria y pasional que conmueve a cualquiera, ha sido tal dentro de nuestras fronteras que ningún europeo puede realizar un análisis que no esté viciado de tales consignas … Por eso es más fácil y probable que los análisis más objetivos y serenos sobre la Unión Europea sean llevados a cabos por personas que no han estado expuestas a esa progresiva y paulatina contaminación cognitiva que hemos sufrido durante tanto tiempo.”.)

Their review is very sympathetic and for that I am appreciative.

The substance they go into would lead to the following conclusions:

1. They understand and support the substantive analysis that we now call Modern Monetary Theory (MMT):

Este particular enfoque analítico se conoce como Teoría Monetaria Moderna, y supone un cambio de paradigma interpretativo en tanto en cuanto le da la vuelta a la extendida forma de entender cómo funcionan los bancos comerciales y centrales, así como los déficit públicos.

2. They agree that artificial fiscal rules separated in context from real goals that advance well-being such as full employment are likely to be destructive and counterproductive:

Acorde a este marco analítico, el dinero no es más que un invento del ser humano para facilitar las transacciones económicas, una herramienta de política económica que debe utilizarse por parte de los Estados soberanos sin absurdas cortapisas como los topes de déficits públicos o de deuda pública, aunque siempre con precaución y astucia para evitar consecuencias no deseadas.

3. They clearly support the Job Guarantee, a centrepiece of MMT:

De esta forma, la consecución del pleno empleo en un entorno de estabilidad de precios es un objetivo perfectamente factible a través de políticas de Trabajo Garantizado implementadas por un Estado europeo que no se ate inútilmente las manos a la hora de aplicar políticas de inversión pública.

4. They propose to use these understandings to escalate the battle at the political level to wrest control from the austerity-biased, neo-liberals to restore democratic decision-making to advance prosperity for all:

La constatación de esta posibilidad técnica es crucial para convencer a la gente de que otra Europa, mucho más sana y democrática, es posible, y de la necesidad de dar la batalla en el terreno político para así arrebatarle a las élites económicas y financieras europeas los privilegios que el propio proyecto comunitario les confiere a costa del deterioro de los derechos económicos y sociales de la mayoría. Por eso tenemos frente a nosotros un libro que no sólo nos brinda la posibilidad de romper los viejos y absurdos esquemas mentales que la ideología neoliberal nos ha inoculado hasta la médula y de conocer una nueva forma de entender la política fiscal y monetaria, sino que en sí mismo este libro es una formidable herramienta para lograr la transformación social que necesitamos y alcanzar así mayores cotas de bienestar y de justicia económica y social.

When I read the Foreward, it was impossible to disagree with anything the Brothers Garzón had written.

In announcing his candidacy in the lead-up to the last national election (in December 2015), Alberto Garzón told the nation that the “state must be the guarantor of employment” (“el Estado tiene que ser garante del empleo” (El Pais).

A Job Guarantee was the ‘main proposal’ that the IU took into the last election, and that was entirely consistent with what they wrote in the Foreward to my book.

I met with Alberto at his offices at the Congreso de los Diputados (Congress of Deputies) or Lower House of the Spanish Parliament in Madrid last Thursday to discuss various policy issues. Eduardo was also in attendance.

It was a very cordial meeting. It came a few days after IU had signed the pact with Podemos to take into the June 26, 2016 general election.

While the topics of this blog were clearly discussed, I want to make it absolutely clear that nothing I write here reflects the views of Alberto or Eduardo expressed at the meeting nor discloses any confidential information that I gained during our personal meeting. All confidences surrounding that meeting are respected.

Anything I write here is based on publicly available information.

If you read the Foreward to my book and ‘El Pacto’, the coalition agreement signed last week in Madrid, two words come to mind – black and white!

Then if you read ‘El Pacto’, a further two words come to mind Syriza 2015

But before we explore those four words further, a little digression is required.

Podemos (We Can) – then and now!

I don’t think I have to recount the history of Podemos, which rose out of the Ingignants Movement in Spain that mobilised mass demonstrations across that nation in May 2011. It should be well known by now.

A recent article in the Marxist Left Review (11, Summer 2016) – Podemos and left populism – discusses the way that Podemos has morphed into a conservative force which is leaving its grass roots out in the cold as its top-down leadership hierarchy pursues personal ambition.

I spoke to several former active members of Podemos during my time in Spain who were dismayed with the way in which the Party leadership had distanced itself from the grass roots and moved, increasingly, towards the Eurozone austerity consensus.

Spain is poorly served by the traditional working class movements. Its trade union movement has largely abandoned its charter after accepting the imposition of neo-liberal austerity (initially as pension reform which extended the retirement age) in early 2011 by the, then, Socialist government (PSOE).

This surrender led to the 2011 Economic and Social Agreement for Growth, Employment and the Sustainability of Pensions.

The Socialist Party (PSOE) has gone the way of such parties in Europe and is now firmly neo-liberal. It is socialist in name only and bears no semblance to the social democratic institution it once was. It is under threat of being wiped out at the upcoming election in June – following a similar decline path to PASOK in Greece, which is now just a small rump of a party.

While IU (which is dominated by the Spanish Communist Party) clearly has always consistently opposed austerity it does not have a grass roots support base although the potential to build that is good, given the way Podemos has behaved over the last several years.

But in 2011, Podemos formed out of Indignant People’s Movement (‘los indignados’), which had organised a variety of public protests and marches throughout Spain to rail against the neo-liberal austerity.

It was a new type of political movement, determined to rid Spain of the endemic corruption among the mainstream politicians and capitalists and give voice to the millions of people who knew they were being screwed by the neo-liberal system but were being ignored by the large political parties.

It also expressed a deep hostility towards the traditional Left in Spain, including IU. The Marxist Left Review article wrote that the “autonomist influence” in Podemos:

… meant that the movement displayed a deep hostility towards the organised left, which applied even to some of the more organised anarchist groups.

A UK Guardian article at the time (February 1, 2015) – 100,000 flock to Madrid for Podemos rally against austerity – said that ‘los indignados’ was “an impromptu revolt of thousands, camping out for weeks and rallying against a political establishment felt to be out of sync with the people.”

At the time, Syriza had not yet surrendered to the Troika, although the portents of capitulation were mounting. The rallies in Spain were interpreted as the beginning of a Southern European revolt against the Troika – first Greece, then Spain.

The Guardian article quoted Spaniards waving the Podemos flag saying that “Greece gives us hope … Things were going poorly there before. Now that the people have power, it can only get better.”

Well, despite what the people said and wanted in Greece, their elected representatives (Syriza) soon betrayed them – categorically and without shame it seems. I was told in various conversations last week that Syriza is now falling apart – betrayal can only go so far.

Nothwithstanding the demise of Syriza in Greece, Podemos leader Pablo Iglesias became the darling of the revolt in Spain and unconditionality gained popularity by mounting an anti-austerity, anti-establishment narrative.

But while there were a lot of slogans about change and empowerment of the people, Podemos has never been a radical party, in the sense that it wanted to change the property relationships that define capitalism.

The article in the Jacobin Magazine (May 14 2015) – The Future of Podemos – noted that:

Ultimately, the Podemos strategy is circling towards a political center that nowadays can only revive the political categories that were decisive before 15M destabilized them. The subjective declaration “I am a moderate” comes to mean the same thing as “I am middle class,” and makes little sense in a context in which the material conditions of the middle class are being demolished.

For more information about the 15-M movement see – Anti-austerity movement in Spain.

The Marxist Left Review article distinguishes its “radical” protests from its “moderate” politics and concluded that “the basic existence of capitalism was never seriously challenged” by Podemos leaders, although it also admits that some commentators have contested that view.

The ‘proof of the pudding is in its eating’ and the most recent dissemination from Podemos, ‘El Pacto’ supports the ‘moderate’ interpretation, which is, in itself, problematic.

Despite more radical pretensions of the grass roots of the movements that gave air to Podemos, its leadership has clearly followed a path of “bourgeois politics and the inevitable pragmatic negotiations with traditional elites”.

Much like Syriza.

While IU was already a well-defined political entity in the mainstream of Spanish politics, it also benefitted from the grass roots ‘Indignados’ protests by improving its vote in the Unidad Popular (Popular Unity) coalition in the December 2015 election to around 926,783 votes (3.68 per cent of total votes) and two seats (out of 350 – or 0.57 per cent) in the Congress of Deputies.

The Spanish seat allocations are disproportional relative to the percentage of the votes won.

Podemos won 5,212,711 votes (20.68 per cent of the total) and gained 69 seats (19.71 per cent of the total seats). It just about beat the PSOE into second place (the latter gaining 22 per cent of the total votes).

Podemos promoted themselves through a slick marketing campaign and its leadership were emphasised as a sort of ‘cult of personality’, which is now coming into conflict with its origins – the Indignados.

The marketing emphasis has led to a top-down controlling structure – “controlling the message is extremely important” to the leadership.

The Marxist Left Review article resonates with many accounts that I heard last week:

Podemos activists – especially those who were previously involved in the left and protest movements – have been increasingly frustrated by the displacement of decision-making away from party circles towards the executive.

There have been resignations of key party members in protest over the now “undemocratic party structures” that have evolved within Podemos.

The Podemos leadership has also made some very conservative statements on economic policy.

In a New Left Review Op Ed (May-June 2015) – Spain on Edge – Podemos leader Pablo Iglesias wrote:

So the strategy we have followed is to articulate a discourse on the recovery of sovereignty, on social rights, even human rights, in a European framework … we openly acknowledge … we are being more modest and adopting a neo-Keynesian approach, like the European left, calling for higher investment, securing social rights and redistribution. That puts us on a difficult terrain, open to the standard criticisms of neo-Keynesian claims.

Neo-Keynesian economics is part of the problem not the solution. Please read my blog – Mainstream macroeconomic fads – just a waste of time – for more discussion on this point.

Further, note the emphasis on “in a European framework”. No exit talk here.

And again the emphasis on “higher investment”, which is the new Left-pro Euro mantra – we will abide by the Stability and Growth Pact fiscal rules at the Member-state level but still engender growth because we will arrange an external injection of investment funds via the European Investment Bank.

That is exactly what the ‘Modest Proposal’ from the former Greek finance minister proposed and presumably informed the early strategy of Syriza.

If anyone believes that the European Investment Bank or other European-level funds are going to stump up sufficient funds to revitalise public infrastructure and create full employment while the Member State government is running fiscal (primary) surpluses then they are off with the fairies. Sorry, it will not happen. It is delusional to think it will.

We will come back to that point soon.

My overall impression is that Podemos is in danger of fracturing as its membership becomes increasingly disillusioned. That is what I kept hearing last week from a range of sources (and I exclude IU members here).

The other point to note is that now, after rejecting the relevance of the Left-Right continuum in politics, Podemos has signed a pact with the United Left. The attraction of power will always, it seems, distort the narrative of aspiring politicians.

The Marxist Review article says of Podemos:

But the triumphant rhetoric of 2014 is already sounding shrill. Despite a strong showing in national elections in December 2015, a growing number of activists have been critical of the party’s political moderation as well as its undemocratic internal regime. These debates are set to intensify as Podemos wins a larger presence in institutions of the bourgeois state, and potentially even backs a government led by the neoliberal Socialist Party.

El Pacto

The upcoming national election on June 26, 2016 after the last election (December 20, 2015) failed to consolidate a government, is shaping up to be a very interesting outcome.

Last Monday, Podemos and the United Left (IU) coalition signed off on a formal alliance to run a list together in the election.

It is anticipated that this coalition will have a strong chance of winning power or at least pushing the PSOE out of second place.

The speculation is that if they were to place second, it is likely that the right-wing PP would form an alliance with the Socialist PSOE to head of the Podemos-IU coalition. Which would really say it all about Spanish politics and the demise of the mainstream Left parties throughout the world.

They have become so neo-liberal in their economic policies that they now entertain ruling with the right-wing conservatives. The speculation is that this would be the end of the PSOE, which would only be a good thing for Spanish politics, given the failure of that party to resist the worst inroads of Troika-style austerity during the crisis, and the corruption of many of its regional officials before that.

The agreement that this coalition has signed – Cambiar España: 50 pasos para gobernar juntos – has some disturbing aspects, although they reflect what Podemos has become.

The fact that the President Mariano Rajoy described ‘El Pacto’ as:

una coalición de “extremistas y radicales”, que “no es lo que le conviene al progreso de España y del país”.

is redolent of how far right the shift in political rhetoric has become.

In English: A coalition of “extremists and radicals,” which “is not what’s best for the progress of Spain and the country.”

See – Rajoy: «Una coalición de “extremistas y radicales” no conviene al país» – for more on that.

The wording and intent of ‘El Pacto’ is anything but extreme and radical. It basically signals a willingness to fall in with the European austerity consensus.

The conservative, right-wing Spanish newspaper La Razon (The Reason) wrote in its article (May 12, 2015) – Podemos impone su programa a IU, que «olvida» su apuesta por la república – that:

… quedó meridianamente claro quién lleva la voz cantante en la coalición y hasta qué punto Alberto Garzón ha «vendido el alma» de su partido para ….

English: “it is abundantly clear who has the dominant voice in the coalition and to what extent Alberto Garzón has “sold the soul” of his party”.

The “sold the soul” comment relates to the expectation that within a united coalition (given the electoral system), IU would get 9 instead of 2 seats in the lower house (Congress of Deputies).

It documents other so-called compromises IU has had to “swallow” to be part of the Coalition (continued NATO membership, etc) (“Claves son también los puntos de su programa que Garzón se ha tenido que «tragar» para confluir”).

Of course, the right-wing media want to sow the seeds of disrepute among the parties of the Left to aid their traditional party of choice the PP.

But there is truth in the statement that ‘El Pacto’ represents a strong Podemos influence relative to the IU which does not augur well.

As background, the coalition agreement is only relevant to the upcoming election. The two parties retain their right to their own political platforms, although officially both will speak to the coalition platform. When I learned that it sounded like a ‘security blanket’ and was tantamount to saying ‘we believe in one thing but will say and stand for another’.

For a start, Clause 11 of ‘El Pacto’ under the broad heading of Social Democracy (“Democracia social”) says that the coalition will pursue a Guaranteed Income scheme.

The Job Guarantee proposal of IU (which was centre stage in the December 2015 election) has gone. The IU still advocate a Job Guarantee as per the wording of the Foreward in my book by the Garzón Brothers, but in terms of this election, the Podemos BIG proposal rules supreme.

That is a backward step.

Basic income schemes are vastly inferior to employment guarantee schemes and have no in-built inflation stabilisation capacity.

Please read my blog – Employment guarantees are better than income guarantees – for more discussion on this point.

More worrying is Clause 2:

El próximo gobierno deberá presentar y acordar con las autoridades europeas una nueva senda de reducción del dé cit público que resulte coherente con las prioridades de nuestra economía: apuntalar la recuperación económica, incrementar el ritmo de creación de empleo, impulsar inversiones públicas que modi quen el patrón de especialización industrial y fortalecer los servicios sociales y el Estado del Bienestar para luchar contra las desigualdades.

Esto exige un ritmo de reducción del dé cit signi cativamente más paulatino que el planteado por la Comisión Europea, y que en todo caso se produzca como consecuencia de una mejora en la nanciación del Estado y no gracias a nuevos recortes del gasto público. El ritmo de reducción del dé cit debe trasladar al nal de la legislatura el cumplimiento de los umbrales de dé cit que establece el Pacto de Estabilidad y Crecimiento de la UE, dado que un ritmo superior podría fácilmente traducirse en una nueva as xia económica y en la imposibilidad de fortalecer la cohesión social en nuestro país.

Debe acordarse igualmente la modi cación sustancial de aquellos aspectos de la Ley de Estabilidad Presupuestaria que más di cultan la aplicación de políticas scales adecuadas a la posición cíclica de la economía y a las necesidades de reforzamiento del Estado de Bienestar, y debe revertirse la reforma del artículo 135 de la Constitución.

Además, un gobierno de cambio impulsará una profunda reforma de dicho Pacto de Estabilidad y Crecimiento, y de las reglas scales en la Eurozona, exibilizando el objetivo de equilibrio presupuestario en los términos que plantea este acuerdo en el apartado “democracia internacional”, para adaptarlo a las necesidades de las distintas economías nacionales.

Which in summary is about ‘austerity lite’ although they do not admit to having joined that club:

1. “The next government must submit and agree with the European authorities a new reduction path for the government deficit that is consistent with the priorities of our economy”.

The priorities are spelt out as “supporting economic recovery, increase the pace of job creation, boost public investments that modifying the pattern of industrial specialization and strengthening social services and the welfare state to fight against inequalities.”

The priorities require (at present) a substantial boost in the overall Spanish government deficit. The economy is barely growing at present and there is massive residual damage from the GFC and the austerity that has been imposed.

And even then, the current fiscal balance is 5.2 per cent of GDP, well above the allowable threshold under the fiscal rules of the Treaty.

Brussels has been turning a blind eye to the Spanish fiscal situation and have allowed a rise in the structural deficit in recent years – that is, an old-fashioned Keynesian stimulus has been introduced by the Spanish government.

That is the reason the Spanish economy started to grow again (from the June-quarter 2013).

The Brussels elites have ignored the deficit rising because they knew it was the only way to generate growth and help support the right-wing PP government at the last election.

If the Podemos-IU coalition was to gain power (which is not impossible at it currently stands), then Brussels would suddenly become very interested in the 5.2 per cent deficit and the suffocating pressure would begin to ramp up the austerity.

What would the ‘coalition’ do then? People have been claiming that because Spain is so big, the Troika would not dare pull a Greek-style coup like they did to run over Syriza last June.

My view is that the Troika would bull-doze a new progressive Spanish government quick-smart and take no prisoners.

2. ‘El Pacto’ sort of has an answer. While saying the new Spanish government would obey the Stability and Growth Pact (that is, the fiscal rules) it would seek to cut the deficit more gradually to bring it back within the allowable thresholds.

It notes that it would not cut public spending to do this but allow growth to generate extra tax revenue. Good luck with that!

This is the mantra that the Left are also employing these days – the ‘austerity-lite’ approach. They implicitly concede that deficits are bad and commit to balance or surplus but try to retain credibility by saying they will just cut more slowly.

But the message (damage) is clear: they are admitting that it is the deficit that matters per se. Fiscal policy thus loses its context – to improve well-being.

3. ‘El Pacto’ says the new Government would seek to change some of the clauses in the Stability and Growth Pact (ease the limits).

Good luck with that.

Why not just abandon the fiscal rules altogether, which if imposed would negate the capacity of the new government to achieve many of the admirable aspirations outlined in other clauses of ‘El Pacto’?

I will comment more on the Spanish situation as time permits.

Conclusion

So ‘black and white’ – Foreward to my book and El Pacto.

The problem is that this looks to be going down the Syriza path. Some sort of unbridled optimism that Spain is too big to be treated badly as it renegotiates the SGP etc.

Syriza was quickly crushed because it had no Plan B – no exit threat – not because it was small.

The new Podemos-IU, similarly, has no exit threat. Indeed, Podemos is pro-Euro and IU have been dragged along for the ride – perhaps hoping to sort things out later.

No threat – no power.

That is enough for today!

(c) Copyright 2016 William Mitchell. All Rights Reserved.

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    26 Responses to Spanish El Pacto – A Syriza Reprise!

    1. Neil Wilson says:

      I can never understand the income guarantee concept in terms of helping the poor. Here in the UK the best income guarantee is the state pension which is targeted at £155 per week. The BBC today is reporting that over a million pensioners are in poverty in the UK at income values higher than that.

      A living wage at £10 per hour is £375 per week. Even at the current minimum wage it would be £270 per week. Or nearly twice the insufficient ‘basic income’ of the state pension.

      So a Job Guarantee gives the poor over twice as much income as even the best income guarantee the UK has been able to offer, and of course competes all other wages into line by definition.

      If it was about lack of higher paid jobs, you’d be campaigning to reduce the age at which the state pension gets paid to free up more jobs. If it was about the poor you’d campaign for a job guarantee which gives the poor more money.

      So why would you want the poor to have less income? There is only one reason. Because the entire policy has nothing to do with the poor and is really about certain types of middle class individuals getting public top ups on their trust funds and pursuing an ideological position regardless of the impact on real people.

      Basic income isn’t a living income at all. It is a Basic Stipend.

      Or BS for short.

    2. Henry says:

      Bill,

      “Syriza was quickly crushed because it had no Plan B – no exit threat – not because it was small.”

      I think you are being unfair to Syriza. The Greek people overwhelmingly wanted to stay in the EZ. I would say that is why Syriza deferred to the Troika. If you want to be part of the EZ you have to abide by its rules and impositions. Until the majority of Greeks believe it is better to exit, then what can any party that wants power do?

    3. Jorge Amar says:

      I´m really worried about Podemos´ denial of the reality , and they are a good example of groupthinking as well. As a spaniard I agree absolutely with Bill analysis. In fact as a economist from the grassroots movements ( ATTAC and APEEP) I´ve been seeing that Podemos each passing day was more confortable with the neoliberal frame , they don´t dare to oppose the SGP ,or the fiscal rules ,or ECB´s intromission, etc. They only demand more time to apply those. Podemos´hope about performing a progressive agenda is based in 2 naif statements: “Spain is bigger than Greece and ECB won´t dare to do us what he did to Greece” & ” We can tax first and spend thereafter” . In my humble opinion if we continue this path, we are doomed to repeat the same mistakes that Syriza did. Podemos is talking about changing european treaties ( nearly impossible to reform) when they haven´t (even taking into account their allies) the power to change our own constitution, they expect to assault the skies (Pablo Iglesias used to say that) without having their feet on the ground.

    4. Henry says:

      You wonder if Podermos, having seen Syriza’s resistance collapse and kow tow to the Troika, has lost its nerve?

      Do the majority of Spaniards want to stay in the EZ?

    5. James Schipper says:

      Dear Bill

      As Henry pointed out, the crucial question is whether to keep the euro or not. If Podemos or other reformist parties insist on keeping it, then they can forget about the rest. It seems that a majority of the Spanish, like a majority of the Greeks, want to retain the euro. Well, good luck to them.

      Regards. James

    6. J Christensen says:

      Niel Wilson (Monday, May 16, 2016 at 19:35) : The driving force behind minimum income guarantee’s, seems to be less a desire to do something decent to help the poor, and more about decreasing the growing costs (administration, health care etc) of dealing with the increasing numbers of poor being created by neoliberal economics.

      This would tend to appease already irate taxpayers who do not yet understand the root causes of this poverty.

      In Ontario Canada, the Liberal provincial government will be doing a small scale pilot minimum income project this fall to test the hypothesis above.

      There seems to be little recognition on the part of the provincial governments, of the underlying macroeconomic causes of their shrinking tax bases and growing expenses. They are merrily ploughing ahead with the sale of public assets, trade missions to Israel, and microeconomic measures such as a provincial minimum income; desperate measures to slow the growing provincial debt.

      Politicians seem to have gotten themselves completely befuddled; searching for micro(economic) sized patches to keep ships nearly broken in half by neo liberal torpedoes fired by national governments afloat.

      The concept of a job guarantee does not occur to people with such a distorted mindset.

    7. Jorge Amar says:

      33% of spaniards want a national currency instead the euro, however 58% euro prefer the euro . I saw this numbers in Gallup a few months ago .

    8. J Christensen says:

      European politics is difficult for the outsider to fully comprehend. The fear of the economic impoverishment that is guaranteed if the status quo is maintained, still seems less than the fear of what might happen if the union were to fragment. The situation there, in many ways, eerily resembles the larger situation under the neoliberal form of globalism.

    9. Kevin Hardin says:

      BIG should be universal and not cut when employed .
      In the correct fiscal context ,full voluntary employment,BIG then becomes
      a top up to the minimum wage increasing the incomes of the poor over either
      the pension or the minimum wage.

    10. David says:

      As a Spaniard, the support for Europe and the Eurozone was (and probably still is) the highest among European countries. You cannot even think about winning an eleccion if you start talking about the options of an eurozone exit. In order to win, you have stand firmly behind Europe (Christensen has put it perfectly). Similarly, it’s not easy to introduce new economic ideas public had not heard of before, if you want any chance winning elections. That’s one of the reasons why Podemos has chosen BIG over JG for the moment. If I’m not mistaken, it’s not a BIG, but a conditional benefit, only for people without income (a real BIG, again, would mean being ridiculed by media and forget about any chance). Podemos can talk about that conditional benefit because Socialist Party has a similar proposal (less money involved) in their program, so Podemos cannot be accused of idealistic naive non-serious proposals.

      In summary, the “centered” and light neolib narrative is needed to succeed even if Podemos people clearly come from the “radical” left. However, they won’t change those ideas in case of being in power because they have no other options. We don’t have (and will not have) currency sovereignty here to sustain public deficits as we would like. Pablo Iglesias and Podemos have taken good note of what have happened in Greece and they won’t make the same mistake: if you’re not sure that you will beat the troika, you’d better not fight. And they are not preparing to go into that fight at all: if someone of the intellectual stature of Varoufakis (there’s not someone half as good as Yanis in Spain) did not succeed, Podemos will not either.

      [Bill notes: deleted video not worth promoting]

      In a certain moment, Pablo says that they will try to harm local elites, but not European ones.
      I think his first plan is to try to get on well with the Europe power. I agree with him, although I don’t think it will work. Most voters would not support him if fighting Europe “and risk Spain’s stability” and we must admit Podemos has no chance of being in power without the help of the conservative Socialist Party, so they also have to respect all those millions of more conservative voters. No party respects the clauses of the electoral program here in Spain, and Podemos will not be different. I will vote them even knowing that their program is paper tiger. They will improvise, and procrastinate while trying to keep the social spending and improving revenues slightly (they can be improved) and convince Europe to sustain the deficit as high as possible.

      Regarding the current disillusion of the supporters: that’s the impression one gets from the more radical, old members, but they are only a few and Podemos is improving expectations with the moderate voters, where you win elections. There will be a lot of disappointment among all people, because a lot of their promises cannot be fulfilled under the euro (you can also feel that in that youtube video when Pablo speaks about doing little things), but at the same time most people don’t want to exit the euro. The role of Podemos is to replace PSOE in the center-left space, an improvement but not a revolution at all (well, if they can change the culture of corruption, that would be a revolution in its own here). Real changes have to come from a European project, like the Varoufakis one.

      Sorry for my English!

    11. Henry,

      “Until the majority of Greeks believe it is better to exit, then what can any party that wants power do?”

      Well, Syriza could have done a lot more after winning a decisive mandate in the referendum. They could have taken control of the Bank of Greece and defied the PTB in the EU. It would then have been their decision, and not Syriza’s, to either throw them out of the EZ or recognise the need for change.

    12. Willem says:

      Off with the fairies added to my repertoire of expressions.

      Thanks for the great analysis.

    13. I am in total agreement with this post. If a Left-wing government cannot credibly commit to reducing the outrageous and socially disolving levels of unemployment, exclusion and poverty then they do not deserve to govern in Spain. Until they realize that they need a real Plan B (exit from the Eurozone), not a softened version of Plan A (“Please, please, Brussels let me enter into an easier deficit reduction path”), they should remain in the oppostion. If they win we will only gain a cleaner government thant the corrupt criminal organization currently in power that some people believe is a political party. This is not enough, progressive parties should be held to a higher standard.

    14. Neil Wilson says:

      “BIG should be universal and not cut when employed ”

      That’s just tax credits with the withdrawal shifted to the tax side – if at all.

      It disrupts the entire wage structure and leads to the ‘Parasite Economy’ that Nick Haneur rightly complains about in the American Prospect magazine.

      There are insufficient jobs and always will be. You can’t top up if you can’t get a job. It’s just another form of ten dogs and nine bones with higher tax rates.

    15. Henry says:

      @Petermartin

      ” It would then have been their decision, and not Syriza’s, to either throw them out of the EZ or recognise the need for change.”

      Why go this route?

      Schauble had indicated he would support and finance a Greek exit. This could have been a negotiated, controlled, guided, financed, debt reduced, low risk exit. Greece could also have remained within the EU. Greece then would have been left to its own devices without compromised sovereignty, without the Troika breathing down its neck. It could then proceed to clean up its internal mess at its own pace behind its own currency.

      Why didn’t Syriza take this option? I would say it was because they knew the vast majority of the Greek people wanted to stay in.

    16. Henry says:

      There may have also been another reason Syriza went with the Troika. If it went the exit route it would have to wear the ignominy of having to clean up and reform the Greek economy. With the route taken, the Troika would be seen as imposing reform and it would wear the heat, at least most of it.

    17. Daniel D says:

      Henry;

      The US would not allow Greece to leave the Euro or the EU for that matter.

      Herr Schauble may well have been genuine in his offer, however, he does not run the show in Europe, the US does. Ergo, NATO, EU sanctions against Russia that punish European nations etc.

      The US in its’ quest for hegemony – isolating Russia, does not want any European state (Greece or otherwise) to have full sovereignty and look eastward to Russia. See Yugoslavia, Georgia, Ukraine etc.

      In case people need to be reminded;

      The Troika is European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF). None of which the Greek people voted for, as far as I am aware?

      It is impossible to clearly understand the choices made by the elected representatives of the people, Syriza or otherwise (Ireland, France, Spain, Italy etc.) without accepting the indisputable fact that those who are elected do not control policy choices, they are simply titular administrative leaders.

      These so-called leaders (across the EU) regardless of their political stripe have all made a choice. They have chosen to look after their personal interests first and foremost. To that end, they quite simply follow orders from above, regardless of the democratic will of their constituencies.

    18. Kevin Hardin says:

      Neil historically full employment has been obtained before and after capitalism it is
      poverty which has never been eliminated with or without paid work.
      Yes I am talking about negative income tax within a full employment context.
      To tackle the fundamental conflicts of capitalism some income should not be in competition
      with profits should not be a cost to employers.
      I am more than happy for the state to employ significantly more of the population if
      that is what is needed to obtain full voluntary employment there are an enormous
      amount of vital work not being done particularly in health and education.
      I never voted for Mr Blair but his government did take many out of poverty and
      tax credits alongside state pension increases were responsible for that .
      The introduction of a universal citizens wage ideally via Open Monetary Finance
      would also be a very effective means to increase aggregate demand to deliver
      full voluntary employment.

    19. David says:

      Stuart, a cleaner government is a good step for me. They have shown a real interest in taking care of social policies, as well. Podemos cannot afford to flirt with a Plan B. A euro exit is not only a technical issue. Even if a euro exit was good for Spain in the long run (I have some doubts), there would be some kind of initial economic shock. It does not matter whether that shock would be big or small, the media and stablishment forces would take advantage to portray it as the worst thing ever. Podemos would be so mediatically demonized, that not only would make it impossible for them to resist in power, but the “radical left” would lose any chance in this country… forever. The stablishment would use that moment to show that there is no alternative to their good old known economic policies, that real left is economically illiterate and is not to be trusted. It would be the end for progressive people here in Spain. And that’s one of the reasons why I support Podemos, their leaders are able to see this (we’d better wait for movements in France, for example). I support the Garzón brothers as well, clearly very good people (and luckily influenced by Bill Mitchell), although I’m afraid they are only considering the euroexit from a technical perspective, which is not good enough, in my view.

      Podemos is under unbelievable media and stablishment attacks now, much before they have no power. They would not stand any chance if there’s some kind of economic shock under their management.

      Despite the crisis, support for euro in Spain has peaked again past year, and that has to do with a media consensus around the euro. A couple of graphs showing that support for euro here:

      “Quite unexpectedly perhaps, it is the highest in Spain, a country that was hit hard in the Eurozone crisis and has experienced austerity measures since then. However both support for membership and the Euro remain extremely high in Spain.”

      https://www.bertelsmann-stiftung.de/fileadmin/files/user_upload/Study_EZ_EUpinions_2015.pdf

      http://s.libertaddigital.com/2015/11/09/apoyo-euro-eurobarometro-2015.png

      http://i.blogs.es/330f84/eu-20life-20better-20or-20worse/650_1200.gif

    20. IDG says:

      I find it very hard to vote for Pablo Iglesias and his ilk… They look like the typical incompetent rancid political leader without genuine ideas, full of resentment and on top cynical and opportunistic personalities, and maybe genuinely evil. A government from those could end up being worse for Spain in the long run that the other flavours of neoliberalism and neoliberalism-lite.

      On the other side I understand the political necessity of I.U. and Garzón, I actually believe they are genuine good persons, probably competent and with good ideas (although I may not agree with them all). Being knowledgeable of MMT is a HUGE plus too for me ofc, even if they will be fighting against all odds and widespread group-think. I.U. has a grey history just as all other old parties which got a taste of power, but Garzón represents a younger generation trying to revitalize the party, and I.U. has given great leadership in the past despite of what others did (Julio Anguita still is one of the best leaders which still is alive nowadays, good thinker and a person with integrity and principled).

      As a Spaniard I have a hard time deciding what to do now after this pact. I really dislike the current Podemos leadership power games and driving ideology (opportunism).

    21. IDG says:

      ” t does not matter whether that shock would be big or small, the media and stablishment forces would take advantage to portray it as the worst thing ever.”

      It’s the “left” which does not understand the reality: you’re being used by those with power to perpetuate the status quo. There will never be a “way out” of this situation without a fight from people, period. Never.

      This is how things always work, and always have had. Now we have all the champagne-socialists in Syriza or Podemos leadership thinking that “there will be other way”. Well: no, there won’t. You won’t be able to sit in a table and ‘negotiate’ with others who do not trust you, don’t beleive you are worthy and see you as an inferior. The psychology of the people in power is widely indifferent to what you think or believe, they only understand power themselves. If you are not willing to call their bullshit, get up of the table or threaten them with unilateral moves they will never bend.

      Instead what we will see is a constant ‘crappification’ of society ala South And Central-America or some Asian countries, and for when you want to fight back, society will be already too disintegrated to change anything for real. This is how decay happens and civilizations devolve into lesser and more brutal ways of government, basically what we have now is the rise of a new feudal reality, and the fools who want to get power and think that you can get along with the status quo and wait for a better day are just fooling themselves, avoiding short term pain because they are too scared to confront reality.

      As I said, a bunch of cynics. Unfortunately is the whole society which has turned itself too stupid and contempt to see it.

    22. financial matters says:

      I agree that a JG is preferable to a BIG. I would like to see a JG at a living wage or about twice the current minimum wage in the US or about $15/hr. There is lots of useful work to be done and everyone who wants to work could be employed and this would put pressure on private industry to meet this minimum rather than a minimum set by a BIG.

      I would also like to see a BIG at the current minimum wage level and made unconditional. This would help pay for ‘reproductive’ type jobs such as people who provide meals, childcare, eldercare etc at home. This would also give people a change to opt out of the JG for various reasons and not become a ‘bag person’.

      If a person was working a JG and collecting a BIG this would put him/her at the level of a typical Costco employee. http://www.businessinsider.com/costco-pays-retail-employees-20-an-hour-2014-10

    23. David says:

      I partially agree with you, IDG. Podemos are a bunch of cynics (in the sense that they change their message according to the circumstances in order to get the power) and will not be able to change anything relevant, anything meaningful for very the reasons you mentioned… including the fight from people as a way out. You cannot expect a fight from Spaniards unless the economical situation becomes completely desperate (something not in the interest of European elites).
      Moreover, in my opinion, you cannot threat with unilateral moves when most Spaniards are clearly against that. That wouldn’t be democratic, and the government trying those moves would be rejected in the following elections. My conclusion is that procrastination (not making a mistake and waiting for the bomb to explode in other’s hands) will be the chosen strategy for all: Podemos, PP or PSOE. If, finally, European countries agree that things cannot go on like this, and the eurozone progresses into a real integration, or is finally carefully dissolved, or there is a real change half-way of those (like parallel national currencies along with the euro), then that strategy might prove the least worse of all.

      Regarding the people from Podemos, I’m not so harsh with Pablo Iglesias. I have some doubts about Bescansa or Monedero, but I think Pablo might be genuinely quite a good guy. There is a (not very serious) anecdote in the blog of the right-wing journalist Pablo Rodríguez (@Suanzes) as the pupil of Iglesias titled “El profesor Pablo Iglesias” which, for me, was good enough to understand how Iglesias might really be. For the moment, I´m able to trust him (even if I expect him to be treated as a traitor in the future, like Tsipras or Felipe González)

    24. Andy says:

      I’m starting to see a pattern here. Syriza, Podemos and you can add the UK Labour party to the list.
      All firmly stuck within the neoliberal framework. Most depressing.

    25. Kevin Hardin says:

      I do not think they are intellectually stuck in the neo liberal framework as much as politically.
      They do not believe they can win power opposing the EU from a left leaning electorate who tend
      to be pro EU .My fear is that lack of courage will leave the way clear for far right governments to
      come to power when the next recession comes and the EU emporers stand naked as unemployment
      soars even higher.

    26. Henry says:

      I would say there are three things going on here:

      Leftist movements around the globe have proven to be failures, corrupt, brutal, tyrannical. Hence their Leftist sympathizers have lost their mojo.

      More and more of the populace have investments in property and equities these days, in effect, causing them to have similar interests to the money elites.

      The elites have the money that can bail out the indebted and therefore the power. To them, the indebted and the “impecune” fall subservient.

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