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Spain’s Left Is Winning the Battle for Welfare — But Not the War on Neoliberalism

A year into Spain's coalition government, today's budget offers major public health care investment and a commitment to expand the Guaranteed Minimum Income plan. These promises show how Unidas Podemos has changed the political agenda — and yet centrist ministers are still stonewalling on measures that risk upsetting business.

Second Deputy Prime Minister Pablo Iglesias speaks at the Spanish Parliament in Madrid, Spain in October. (Pablo Blazquez Dominguez / Getty Images)

“This government is different because we are in it,” Spain’s deputy prime minister Pablo Iglesias told Jacobin last month. “We are the only force from our political tradition that is in the government of an EU country, indeed in the fourth-biggest eurozone economy.”

The ten-month-old coalition between his radical-left Unidas Podemos and the social-democratic PSOE was, he acknowledged, “full of risks, of dangers.” But he still thought “in historical terms, we’ve done the right thing” entering office as a junior partner.

The budget deal agreed upon by the two parties, which passes its final parliamentary vote this week, shows the fine balance between the risks and potential benefits of this strategic wager. It includes key concessions to Unidas Podemos’s agenda around boosting social spending and reinforcing the welfare state — but also lays the foundations for a wider recovery plan much more reflecting the PSOE’s own economic orthodoxy and centrist instincts.

First, the positives: overall social spending (excluding public pensions) will rise by 29 percent on 2020 levels and by 47 percent on the previous budget, passed by the right-wing Popular Party government in 2018.

Unidas Podemos also secured the expansion of the coalition’s Guaranteed Minimum Income scheme and a commitment to bring rent control legislation before parliament by February. These are real achievements, not least considering the PSOE-heavy balance of forces at cabinet.

Yet it’s equally clear that PSOE-run ministries have stonewalled or diluted even basic social measures needed to offset the fallout from the pandemic, wherever this would impinge on corporate interests.

Prime Minister Pedro Sánchez’s progressivism stops short of measures that would require challenging existing power relations. Now, the government’s economic policy heavyweights — drawn from the PSOE’s right wing — look set to push forward with an investment plan that will harness the lion’s share of Spain’s €72 billion in EU grants for a corporate-led recovery plan.

Defending the Welfare State

Iglesias’s party wants to show Spaniards that its presence in government is translating into concrete progressive steps. Indeed, he sold the agreement as marking “a new era in the country’s political economy, one that makes a definitive break with the neoliberal period of cuts and austerity.”

Many of the central concessions his party has extracted as part of this deal aim to reinforce the hollowed-out public services that are today most directly tasked with tackling the pandemic.

More than €5 billion in extra spending will go toward Spain’s depleted national health care system. After years of outsourcing, public-private loan schemes, and various forms of mismanagement, this has arguably been the hardest-hit part of Spain’s public sector over 2020.

In the immediate term, ten thousand health workers will be drafted in over the course of 2021, as Europe confronts potential further waves of the pandemic together with a concurrent backlog in routine care.

The budget also makes major strides to expanding the “care economy” — with €600 million in additional spending for nursing home care (a 34 percent increase in national government funds in this area) on top of €700 million further investment from the European Recovery Fund for building up home-help services.

Nacho Álvarez, who led Unidas Podemos’s budget negotiations team, explains that the package also looks to anticipate potential complications in the approach taken by regional administrations, who are largely responsible for Spain’s decentralized health care system.

Attempting a move away from the disastrous corporate-managerial model favored by right-wing governments in Madrid and elsewhere, the coalition will seek to combine a considerable cash injection for social care with a renovation of the sector — now to be built around smaller care centers, with more on-site care staff.

The budget plan also commits over €1 billion in extra funding to Spain’s network of frontline primary care centers — one of the areas of the public health system least affected by outsourcing.

Unidas Podemos also negotiated stronger state funding for public housing. National government spending in this area is promised to more than quintuple; a project comprising twenty thousand new social housing units had already been unveiled back in September.

A 44 percent increase in scholarship funding for public universities – most of which will go to low-income students — forms part of a multibillion-Euro pot of fresh education spending, which also includes the first funds allocated to the coalition’s program of developing free, universal, public preschool care for new borns to three year olds. There is also a 60 percent rise in spending devoted to tackling child poverty.

But, as Álvarez acknowledges, even if many of the package’s stand-out measures may appear ambitious on paper, his party’s experiences of trying to implement policy pledges during its first year in government show there is plenty of reason to “avoid triumphalism.”

Why his Unidas Podemos colleagues harbor such concerns can be seen in the rollout of the Guaranteed Minimum Income — a social assistance program for Spain’s poorest families and arguably the star policy of the party’s first six months in office. The implementation of the scheme under a PSOE-controlled ministry has thus far proven highly dysfunctional — only a fraction of applications have even been processed, in part due to a lack of resource capacity and state personnel.

Securing extra funding for the program and simplifying access criteria, Unidas Podemos believes the budget measures will address these administrative weaknesses. But the failures of implementation at a moment of acute social need have undeniably been a blow to the party’s — and the coalition’s — image.

Pursuing Continuity

Pedro Sánchez at European Parliament, 2019. © European Union 2019 — Photo Source: EP

Beyond this significant cash injection into the welfare state, the progressive credentials of the recovery plan are rather more unclear — with Unidas Podemos’s influence evidently falling away when it comes to deciding the strategic guidelines of economic policy.

The coalition nonetheless tends to stress the unprecedented nature of its wider stimulus plan, contrasting the EU’s response after the 2008 crisis — defined by austerity and punitive bailouts — with its neo-Keynesian one in 2020.

As one of the countries hardest hit by the pandemic, Spain will receive €72 billion of transfers from the Next Generation EU rescue fund over the next three years (with the option of €70 billion more in loans) — of which two-thirds will be directed toward a green energy transition (€26.6 billion) and digitalization (€23.7 billion).

The Guardian has singled out the government’s ambitious decarbonization strategy for praise; its global environment editor Jonathan Watts notes that “Spain is shutting down 69% of its coal-fired power plants this year and next — a pace of decommissioning not seen anywhere else in the world.”

But the government’s actual degree of autonomy in implementing this major investment plan is limited: it depends on an EU-wide framework heavily weighted toward various forms of public-private partnership (PPP). In this context, the €750 billion EU fund will also operate as a means to consolidate Europe’s corporate sector.

As Izquierda Unida economic secretary, Carlos Sánchez Mato, told Jacobin: “The green transition is being carried out hand-in-hand with the same [economic] interests. For me, it is very positive that the necessary infrastructural projects are being undertaken to eliminate CO2 emissions, but not if it is taking place through this model of public-private collaboration, which will tie the green transition to the large corporations that have benefited most from our current energy model. We need a much stronger public-sector presence as well as more public-social initiatives.”

This point is echoed by economist Iván Orosa, who maintains that: “With the EU funds, there is no possibility of proposing structural reforms like a substantive reindustrialization policy or increasing the weight of the public sector in production … Those who run the EU have no intention of allowing Southern Europe to stop being what it is right now: a repository of cheap labor and a tourist destination for the middle and working classes of Northern Europe.”

In this respect, rather than addressing the structural imbalances in its existing economic model, Spain’s recovery plan is likely to reinforce the position of major corporations concentrated in sectors like construction, energy, and finance, which have come to dominate the economy in the wake of a gradual deindustrialization process that began in the 1980s.

At least 50 percent of the coalition’s recovery plan will be dedicated to PPP projects and other initiatives for businesses — with Spain’s three energy giants (Iberdrola, Endesa, and Naturgy) likely big winners. Among other PPP projects, these major firms are competing over €8.9 billion the coalition is allocating to investment in renewable hydrogen.

Endesa alone has applied to receive up to €16 billion in EU funds for a hundred ten projects that range from retrofitting millions of buildings to ensuring its network is carbon-neutral by 2040.

The Basque regional government is already planning to assign €1.8 billion for the digitalization of Iberdrola’s network; the Bilbao-based multinational is also seeking PPP contracts to build new solar plants, as well as leading the pack on green hydrogen. Such a corporate-led approach to a green transition implies the “preservation, not transformation” of class power — as Yanis Varoufakis and David Adler noted about the EU’s Green Deal more broadly.

 

Given the tight time frame the European Commission has set for approving these proposals, and the Spanish state’s lack of administrative capacity, much of the process of assessing projects and assigning funds will be overseen by the “Big Four” international consultancy companies — Deloitte, PwC, Ernst and Young, and KPMG.

For Alfons Pérez, of left-wing think tank ODG, “this calls into question the transparency of the choice of projects” and “implies a clear conflict of interest” — indeed, most of the companies listed on Spain’s Ibex 35 stock index are regular clients of these consultancies.

Yet, for Sánchez and his party colleagues, the goodwill and cooperation of the Ibex-listed firms represents a fundamental condition not simply for the coalition to survive a deepening crisis, but also for PSOE to cement its position as the main party of the state over the coming decade.

For all the Spanish right’s hysterical rhetoric about his government representing a “social-communist” takeover of the country, Sánchez has gone out of his way to show economic elites that he is a man they can do business with — most recently green-lighting the merger of CaixaBank and the publicly bailed-out Bankia to form Spain’s largest financial institution.

Indeed, journalist Esteban Hernández reports that the managing director of Spain’s largest international investor, BlackRock, has now called on Ibex 35 CEOs to throw their support behind Sánchez.

Betting on Coalition

In his recent Jacobin interview, Iglesias made clear he has no illusions about the limits the coalition arrangement imposes — recognizing, for example, that “for us, Bankia should be a public bank, but with our thirty-five MPs, it was very difficult to convince the party with whom we are in government of that.”

“Will the government do all I would like, in [terms of boosting the strategic role of the public sector]? No,” he acknowledges, “because the negotiation results from a correlation of forces in parliament.”

Yet he is also adamant that his party’s decision to enter government was the right one. Although it risks losing its distinct political profile by being part of the coalition at a time of unprecedented crisis, Unidas Podemos is betting it can secure a number of short-term concessions to its agenda — legislative achievements which, if adequately delivered, can stabilize the Left’s position institutionally as well as electorally.

For Iglesias: “Our voters went with us so as to push with the (limited) force we have to turn around, albeit only partially, certain injustices.”

This might be some distance from the alternative state project his party articulated so powerfully during its initial offensive in 2014–15, seeking a break with Spain’s neoliberal regime. But, in a context of retreat for the Left internationally, Unidas Podemos has made a strategic bet on “being inside,” as Orosa puts it.

This wager rests on a calculation not only that its margin of engagement is still sufficient to drag PSOE leftward on certain strategic issues, but also that securing legislative gains will translate into greater electoral weight.

This, it is hoped, can consolidate the Left’s foothold within national institutions after a period of vicious factionalism and an ebbing of the left-wing activism and political engagement catalyzed by the Indignados. A historic coalition — the first in eighty years to include a force to the left of PSOE — was viewed as offering the party renewed focus and allowing it to avoid the type of implosion currently afflicting the Corbyn project in Britain.

After years of sharpening nationalist tensions, Unidas Podemos’s wager is furthermore rooted in the belief that this coalition can create political breathing space to defuse the volatile national-territorial question.

In a moment of reduced confrontation around Catalan independence, Iglesias’s party is betting that its mediating presence in government will serve not only to consolidate an alternative progressive voting bloc — one including Basque and Catalan nationalists — but also to shift the axis of public debate away from the institutional gridlock and corrosive culture-war dynamic that had gripped Spain between 2017 and 2019.

“Drilling Through Hard Boards”

The difficulty is, Orosa reminds us, “if you are going to embrace reformism, you have to actually win reforms.” Expansionary public spending cannot act as a panacea for all social conflicts; and time and again, PSOE has proven unwilling to commit to measures that risk imposing losses on economic elites.

Over the past year, Unidas Podemos has been forced to laboriously grind out even the most modest advances on key material issues like housing and labor rights — with every gain secured immediately threatened with dilution at a later stage in the policymaking process.

Even the night before the budget was announced, Unidas Podemos had to threaten to delay it, simply in order to force an agreement on a timetable for rent-control legislation. PSOE agreed to proceed with this — a key measure in the coalition’s initial program — but then immediately pushed for exemptions for tens of thousands of individual non-corporate landlords.

This suggests how much more work is needed to ensure the legislation is not defanged in coming months. For Izquierda Unida’s Carlos Sánchez Mato, “PSOE has no desire to confront those who own thousands of housing units, like the vulture funds, or even the smaller rentier class that live off the income generated by 10 or 15 apartments.”

Pedro Sánchez and Pablo Iglesias during a press conference in Madrid, Spain, 2019. (Xaume Olleros / Getty Images)

PSOE premier Sánchez seems more willing to engage with his coalition partners on tax issues — but, again, the promise of major reform has been put off until next year. There have been moderate increases in capital-gains tax and income tax for high earners – as well as the elimination of tax relief for private pensions and the introduction of a weak Tobin tax.

But given Spain’s narrow tax base (with a tax-to-GDP ratio 6 points below the Eurozone average in 2019), much more substantive reforms are needed to fund a chronically under-resourced and under-staffed state.

As Sánchez Mato notes, the suspension of EU budgetary rules until 2022 has “won the coalition breathing space,” but if “Spain is to avoid a new round of austerity in 2023, it has to use this time to build up its tax base, with measures like a meaningful wealth tax and reform of corporate taxation.”

The introduction of a wealth tax remains one of Iglesias’s objectives for next year. Along with the expected negotiations on labor reform and rent controls, this represents the type of area where Unidas Podemos must secure advances in order to justify its presence at cabinet.

In a recent standoff over strengthening the ban on housing evictions, Iglesias was able to force PSOE’s hand by seeking a united front with Catalan and Basque leftists in Congress, while also engaging with housing activists outside the institutions. Similar tactics will be needed going forward — and a renewed upswing in social mobilization could strengthen his party’s hand further.

So far, at least, Unidas Podemos has made qualified achievements in social and economic policy. Yet, given the sheer magnitude of the social crisis Spain faces, it’s clear that this progress risks being overshadowed by far larger developments.