Spanish workers on the march

July 17, 2012

Lee Sustar reports on Spain's economic crisis and a new resurgence of struggle.

A SWEEPING $80 billion austerity program pushed by Spain's right-wing Prime Minister Mariano Rajoy has been met by a new surge of workers' resistance, with miners leading the way and public-sector workers joining the battle with street blockades in the capital city of Madrid.

The public workers' protest came nine days after 200 striking coal miners from Asturias arrived in the capital after marching along with their supporters nearly 250 miles to Madrid to protest the withdrawal of government subsidies from their industry.

The miners got a huge popular reception in Madrid. An estimated 150,000 people--many of them organized by Spain's two main union federations--turned out on the streets around midnight to greet the miners after their march.

The miners' strike, which began May 31, has been regularly attacked by riot police in Asturias, but the miners have fought back by blocking roads and even using small rockets to push back the cops. So it wasn't surprising that police in Madrid gave their own "welcome" to the Austurian miners with a vicious attack that left 76 people injured.

Miners with tens of thousands of supporters in León during the Black March to Madrid
Miners with tens of thousands of supporters in León during the Black March to Madrid (Raúl G. Villalón)

Nevertheless, on July 16, workers were back in the streets, as groups of government employees blocked key roads around Madrid to protest pay cuts imposed by Rajoy. Other groups set up picket lines outside the offices of the ruling conservative Popular Party. They carried signs that read, "Let a parliamentary representative be the next one out of work" and "No cutbacks, Rajoy resign."

Those actions came a day after thousands of public-sector workers demonstrated without a permit in central Madrid to protest the cancellation of their annual Christmas bonuses as well as cutting paid personal days from six to three.

THE GOVERNMENT'S social spending cuts and regressive tax hikes--implemented under pressure from Germany and other European governments after they announced a $150 billion bailout fund to support Spanish banks--are the latest phase of the debt crisis that afflicts the eurozone, the 17 nations that share the euro as a common currency. Under the terms of the "rescue" deal, Spain must cut its government budget deficit from 8.9 percent of gross domestic product (GDP) today to 2.8 percent in 2014, a goal that will be impossible to reach without wrecking Spain's social safety net.

Thus, the austerity measures, announced on July 11, target Spain's most vulnerable. Rajoy's "reforms" include limiting benefits for the unemployed to six months, cutting benefits for retirees and the elderly, and reducing employer contributions to social security funds.

Other cutbacks include the elimination of mortgage deductions on personal income taxes and a big jump in the country's consumption tax, known as the value-added tax, from 18 to 21 percent. For many cultural activities, such as concerts, theaters and films, the value-added tax rate will jump from 8 to 21 percent, which will have a devastating impact on the arts.

The Spanish austerity program also puts the squeeze on the country's regional governments, which have enjoyed considerable autonomy since the end of the decades-long Franco dictatorship in 1975.

Under the Rajoy plan, budget-strapped regional governments can apply for financial aid from the central government. But in order to get the money, they will have to give officials from Rajoy's government oversight over key budget decisions--just as the central government itself must bow to the edicts of European Union officials.

Rajoy's Greek-style cutbacks follow two earlier rounds of austerity in Spain. The first came under former Prime Minister José Luis Rodriguez Zapatero of the Socialist Party, who in May 2010 announced cuts equivalent to 1.5 percent of GDP. His measures included a wage cut for public-sector workers, abolition of subsidies for infants, a pension freeze, an increase in the retirement age, a 2 percent hike in the value-added tax, a rise in tobacco taxes and the passage of a law that made it easier for companies to fire and hire workers and gave employers advantages in collective bargaining.

Zapatero abandoned hope of reelection as the Socialists popularity plunged amid the rising protests of the Indignado movement, led by young people who occupied the main public squares of Spanish cities for weeks in 2011.

When Rajoy took office in November 2011, he pushed the austerity agenda further with $19.3 billion in spending cuts and tax increases. Even so, Rajoy--eyeing the collapse of the establishment parties in economically ravaged Greece--was at this point still unwilling to meet the demands of the eurozone's German-led austerity camp, declaring that it was impossible for Spain to meet its target of cutting its budget deficit to 4.4 percent of GDP in 2012.

But then the Spanish government was forced to bail out the big bank Bankia for $32 billion and counting. Created through multiple mergers of regional savings banks, known as cajas, Bankia became, as the Financial Times put it, "the bank that broke Spain." Interest rates for Spanish bonds skyrocketed as investors concluded that the Spanish government would soon be forced to absorb the losses of even more big banks. Rajoy had no choice but to turn to Europe for a new bailout.

Spain was supposed to be spared the public humiliation visited upon Greece by the so-called troika of the European Union, European Central Bank and International Monetary Fund. But at a European summit, politicians agreed to the European Union assuming oversight of Spanish banks, a huge loss of sovereignty.

Thus, Spain was strong-armed into Greek-style austerity in social spending while raising taxes on working people. The cutbacks come as Spain's recession is expected to worsen, according to the International Monetary Fund, which predicts that the Spanish economy will shrink by 1.5 percent this year and decline by another 0.6 percent next year. That means unemployment could hit a stunning 25.3 percent next year.

With the economy already unraveling, Rajoy's agenda, if fulfilled, will lead to the same level of social catastrophe seen in Greece. As writers for the Spanish socialist website Viento Sur put it, the program "constitutes an attack on the social majority and is a declaration of war against the working population."

GIVEN THE scale of the attack, it was no surprise that the Asturian miners' struggle captured the imagination of working people who are fed up with the misery of long-term unemployment, highlighting a growing radicalization of Spanish society that goes beyond the young people who spearheaded the Indignado movement.

After years in which labor protests have been focused mainly on stage-managed demonstrations and the occasional one-day general strike, the miners' determined fight has set an example for workers--like the public-sector union members who undertook confrontational tactics like blocking key streets in Madrid. Unlike top union leaders--who have called for a general strike, but not until September--these groups of workers are trying to rally resistance before the cuts can take effect.

But like in Greece, the Spanish government has made its message clear: the cuts will keep on coming until workers are organized and powerful enough to stop them.

As in the case of Greece, the authors of Spain's austerity agenda are blaming the victims. They claim the problem was irresponsible Spaniards who borrowed too much money to buy houses that were too expensive for them. When mortgage loans couldn't be repaid, the banks got in trouble and had to be bailed out by the state. So now the taxpayers have to be squeezed to keep the government budget under control.

This scenario is familiar to anyone who's followed the establishment claims about the U.S. housing boom and bust. It's the wrong argument in the U.S., and it's wrong in Spain as well. The housing bubble was created not by individual homebuyers, but by banks eager to pump up profits on the basis of easy money made possible by the eurozone's low interest rates. The key players were the cajas, which acted as funnels for big banks in Spain and across Europe looking to make a fast and easy return on their loans.

Both the Zapatero and Rajoy governments tried to keep the system afloat by encouraging mergers into larger banks, which led to the creation of the Bankia Frankenstein monster. But when Bankia went under, it took with it the savings of people who'd bought stock in what they thought was a solid investment. As the Wall Street Journal reported:

Thousands of Spanish citizens are preparing to see some of the savings they invested in local banks wiped out, as their government begins a grand overhaul of those lenders, a central condition for a large bank bailout from the eurozone. Higher up in the creditor pecking order, however, owners of senior bonds issued by the same institutions appear to be in the clear, according to the leaked terms of the bailout deal.

In other words, big bondholders are first in line to extract money from the Spanish working class even as decades of social advances are eliminated by Rajoy.

The Spanish crisis marks a new phase in the European debt crisis. Despite the severity of the budget cuts, it's far from clear that lenders will be satisfied with Rajoy's austerity measures. Plus, the two European financial funds--the European Financial Stability Facility and the European Stabilization Mechanism--despite totaling nearly $1 trillion, aren't big enough to bail out both Spain and Italy, the other big debt-plagued European country that may need assistance.

But as Spain spirals downward, big multinational corporations are poised to grab Spain's main corporate assets, taking advantage of European Union rules that limit state ownership of private corporations. Since the Spanish government, having bailed out big banks, is now part owner of several key companies, it will have to sell its stock in those companies at cut-rate prices.

All this will sting Spanish politicians and capitalists, who, like their Greek counterparts, are being forced to accept the German-driven austerity agenda. But Spanish employers, like those across Europe, are united in their intent to make the working class in Spain and beyond accept the elimination of decades of social gains and a severe cut in living standards.

However, the Asturian miners, like the Greek workers who waged years of mass struggle, are drawing a line. Resistance such as theirs is the only way to stop the devastating austerity drive.

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