This is the latest in a series of entries looking at what we can expect in 2013. Each weekday, a guest analyst will look at the key challenges facing a selected country – and what next year might hold in store.
By José Ignacio Torreblanca, Special to CNN
Editor's note: José Ignacio Torreblanca is a lecturer at UNED University and Head of the European Council on Foreign Relations’ Madrid office.
How does 2013 look for Spain? Is the worst over? The answer to that question depends largely on how “worst” is defined.
The absolute worst scenario, the collapse of the euro, can now be set aside thanks to the decisive action of European Central Bank President Mario Draghi. The wording he chose in a statement on the issue – “I will do whatever it takes to save the euro and, believe me, it will be sufficient” – was exactly what the markets had been waiting for since 2010. Markets now know that betting against the euro could be dangerous.
But this does not mean that the crisis is fully over.
For domestic political reasons, EU leaders are still reluctant to follow Draghi’s lead and do whatever it takes to consolidate the euro. A banking union has been born, but it is still half-baked, while the more ambitious proposals aimed at a fiscal union are still in their infancy. EU leaders are expected to continue with their exasperatingly slow and piecemeal approach. And, especially with German elections looming, expect “too little, too late” to best define the EU’s snail-like progress.
The next worst scenario, a Spanish exit from the euro, can also be dismissed. Following some hesitation over the acceptability of a Greek exit, Angela Merkel has realized that the survival of the euro implies and requires the survival of its individual members. With the European Stability Mechanism, the European equivalent of the International Monetary Fund, the EU has erected a financial firewall able to break the vicious link between sovereign and private debt. Spanish banks, which as in the United States were a source of the crisis, won’t be able to topple Spain. This means that while Spain might still be pulled out of the markets, be forced to apply for a full rescue and be placed under the supervision of the Troika, it won’t be allowed to fail.
More from CNN: Spain's next crisis?
But avoiding two major disasters does not mean that the worst is completely over. Growth prospects for Spain are weak, indeed negative, for 2013. Analysts also believe there is little or no prospect of an improvement in the unemployment situation over the next two years or more. With a staggering 25 percent of the active population unemployed – a figure that climbs to a staggering about 40 percent of those under 25 – joblessness in Spain is now not just a social drama, but risks undermining the legitimacy of the political system.
Five years into the crisis, Spaniards have turned their backs on politicians, who they consider too detached and insensitive to understand the pressing concerns of the average Spaniard. A series of corruption scandals, involving all major national institutions – from the Crown to the municipalities – has demoralized the public and further eroded confidence in democratic institutions. In addition, the tough austerity measures imposed to meet public deficit targets imposed by the EU mean that, for many citizens, the Spanish welfare state (including its world class and free health system) is now being questioned.
To top it all off, Spain faces a secessionist challenge, an issue that is further poisoning politics and stirring passions across the country.
All this means that Spain finds itself squeezed from above, as the EU piles pressure on the country to enforce further austerity measures, and from the market side, as the economy struggles to create jobs. This economic malaise provides the backdrop for a society showing signs of increasing fatigue, and which is now pushing back against cuts to health, pension and education services.
Next year will be a tough one for Spain, and while most of the economic reforms necessary to help it overcome the crisis are already in place, their effects are not yet being felt in a positive way. Spaniards have averted the worst, and are no doubt hoping for brighter days ahead. But the prevailing feeling here is one of despair over the lack of progress in growth and employment, and frustration over the high social costs of the crisis, including rising inequality.
2013 will be a transition year. But Spain should prepare itself for plenty of bumps on the road to better times.
Reblogged this on All Things Geography.
Spain and much of Europe still have farther to fall before any turn towards prosperity will take place.
Is the worst over for Spain? It could be if those idiots in Madrid would only do the following: first by giving the Basques the independence they deserve and then by pulling Spain out of the Eurozone. Unfortunately, those idiots won't have the sense to do either!
What an ill informed post! Since when is splitting up a nation a remedy to solving economic problems. And, pulling out of the European Union, well....enough said I believe!
Wow, you sound like an American that studied abroad in Bilbao......?es cierto?
They are very quiet lately, do you mean Catalans?
The problem of an exit by Euskal-Herria or the Basque homeland of three provinces, Bizkaia, Guipuzkoa and Araba, and then the Roman or Madrid fialty province of Nafaroa, is that these four provinces account for about 40% of the demand deposits of Spain. Including these four provinces there are a total of FIFTY provinces. So a Basques exit would indeed be a blow to the coffers of Madrid. Nonetheless, Madrid returns to the Basques provinces only 60% of the taxes it collect as services back to these four very frugal and productive provinces. That is the main reason why the Basques provinces can be likened to the plight of Germany in picking up the tab for everyone else.
I wonder is there is a moderator in this blog to prevent insulting comments like this one from being posted.
Well, until the people give up on protesting about having to work 12 months for 12 months pay, instead of 14,
the Kingdom has a long, long, way to go. Protesting seems to have become a "hobby" nowadays.
Catalan problem solution – Stop buying Cava and Wine from Catalunia. Catalans vote with their pocket not from ideals.
Corruption problem solution – fast trials with stiff sentences.
Employment problem solution – restructure labor laws to make dismissals less costly.
Eliminate dangerous taxes – Tourism tax
Invigorate Real Estate market – Non-residents exempt from property sales tax when they purchase property.
Deficit Reduction – reduce size of autonomous region governments. Eliminate politicians pensions for life.
Cash flow – incentivise tourism which is one of the things which the country does very well.
Convince the Spanish football coach Vicente del Bosque to enter politics. At least he is good at what he does and that is more than be said of Spanish politicians.
don't worry, have fun like today is your last day. they say the world could end tomorrow.
No, the worst is not yet over in Spain! It is stuck in an economic trap, with large debts, an overvalued currency and collapsing property market. Much of the borrowing is carried out by regional governments and is beyond the direct control of Madrid. Their debts are becoming central government debts. There's also a huge hole at the banks, which are short of 59 bn euros. Foreign lenders and investors started to demand their money back last year.
Just regular propaganda article because there is no freedom of the press. There was a book written by Thilo Sarrazin, a German banker and a politician with a PhD in economics " Europe Does Not Need the Euro" . The book ,so far as I know , as his other book was never published in English-he probably makes too much sernse. The Globalist press puts out lies and little of what is happening makes sense, because the truth is hidden from most people. So called "democracies" in the E.U. are ruled by international bankers to the detriment of the people-be it Spain or Greece. Their economies are destroyed with planning from Brussels, their tourism diminished due to euro , jobs offshored due to Glabalization. Unless there is a change things willl get worse.
I'm going to go rub one out
Judging from the avalanche of negative articles about Spain and the euro in the Anglo-American media during the last year one can only conclude that the Anglos are doing just what they do best, that is spreading their own mess around in order to conceal their own responsibility in this financial and economic crisis we are in. Though they have been very apt at transforming what in origin was a crisis concocted by the corruption and venality in Wall Street and the City into a sovereing debt ( or as they say, a euro-crisis) the truth is plain to see. Thorugh fiat money they have bailed out and de facto nationalised most of their bankrupt financial systems with hundreds of billions of dollars and pounds thus creating a massive distortion in the world economy.
Spain will suffer. Actually having to pay off your debts makes you wish you had not been so stupid to ring them up in the first place. I predict that France will rule the headlines in 2013 in terms of economic trouble in the EU and that the EU will survive. The EU has no growth prospects for the most part. I predict if any countries gets booted out of the EU in 2013, it will be Britain in the Summer followed by Greece in the Fall.
Conservative PM Rajoy´s biggest problem is not economics. It’s his public image. He is indecisive. In fact, he does not know how to simplify and say exactly what he intends to do. Actually, the more he explains, the less we know exactly what he’s going to do, except to follow what EC requires of him, and this he is doing. Specifically, when he did choose, he chose to raise taxes, lower social benefits and salaries, and ignore reducing unemployment via helping small businesses, the key to any job recovery. Certainly he’s more afraid of Catalonia’s financial implosion than its continuous corruption scandals. He even finished the year by assuring us that 2013 will worse than 2012. Regardless, his reforms are enormous when compared to former PM Zapatero´s administration, which left the country disoriented and on the verge of bankruptcy. Moreover, though unemployment will continue to rise, his reforms are forceful enough to guarantee a turnaround in 2013 in spite of his eroded image.
Many Catalans don´t vote with their pockets, so if they stop buying cava, that's it, we´ll quickly leave Spain! We want to lleave anyway, (many do), so no problem with that. At least we´ll get rid of a lot of corrupt people! Also we don´t want to maitain a corrupt and useless monarchy, that kills elephants and bears, while many people are thrown out of their houses!
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I in the vein of this blog its a master serenity ! Cheerful I bare this on google. "Irrationally held truths may live further hurtful than reasoned errors." by Thomas Huxley.
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