Opinion

Spanish socialism's historic defeat

Jonás Fernández Álvarez

01 December 2011

A double U-turn on structural reform saw the PSOE evade difficult leadership decisions and ultimately lose its political and economic credibility

The Spanish general elections held on 20 November resulted in a historic victory for the People's Party (Partido Popular, PP). The Spanish Socialist Worker's Party (PSOE) registered its worst result since the re-introduction of democracy in 1978 with just 28.7% of the vote. Its time in government was marked by the impact of the economic crisis but also by several policy mistakes which were, in the end, pivotal to its electoral collapse.

Having said that, it should be acknowledged that whilst in office Jose Luis Rodriguez Zapatero’s government registered significant accomplishments. Notably, it modernised the socialist agenda, focusing on the development of individual and social freedoms in line with the tradition of civic republicanism. And more recently, the prime minister made several difficult decisions on economic policy which significantly helped the country avoid slipping into an even darker place.

Nevertheless ‒ although a more thorough assessment of Zapatero’s time in office demands a longer-term perspective ‒ it remains that a number of incorrect strategy decisions made over the last few years amplified the negative effects of the crisis and conditioned the way in which the government and the PSOE were perceived. These decisions are central to understanding the PSOE's worst ever result.

Uncertainty in the eye of the economic storm

The first reason that helps to explain the socialist’s election defeat is the intensity and duration of the economic crisis, and the depressing effect it had on the labour market. A total of 2.4 million jobs have been destroyed since 2007 and the unemployment rate is over 21.5%. Furthermore, after a promising start to the year, the Spanish economy stagnated again and the forecasts for the second half of the year indicate a further drop in activity. After more than a decade of extraordinary growth, the political and economic situation after the crash has become far too complex for any governing party to manage successfully, as recent developments in other European Union countries show. However, despite these facts, this diagnosis alone is insufficient: the PSOE also made significant mistakes that intensified voter's anger in the potentially explosive context of the economic crisis.

The PSOE’s second parliamentary term started in 2008 with mediocre results, despite it winning more seats and increasing its share of the vote. Between its first term, 2004-08, the economy boomed with an average growth of 3.6% and the creation of 2.8 million jobs, a period which also saw the unemployment rate fall to 7.9%. In addition, all departments of government came out of the 2005-2007 period with budget surpluses. Yet despite these economic results, the implementation of a progressive social policy agenda and the expansion of civil and individual rights, its vote grew an almost insignificant 0.3% at the expense of minor parliamentary parties. Meanwhile, the PP increased its previous share of the vote by 1.1%.

These results on the surface reveal that the PSOE failed to capitalise one of the most buoyant period in Spanish political history since the restoration of democracy. The reasons behind this are complex. For one, the Spanish right never accepted its unexpected defeat in 2004 and continued to wage a campaign based on increasing social tensions. To its credit the PSOE did not get drawn into this polarising vortex, rather choosing to propose difficult, but necessary, institutional and structural reforms geared towards putting Spain on a sustainable economic path. Despite impressive economic growth between 2004 and 2008 the economic boom had no solid foundations. Even when the government drove the National Reform Plan to redirect the growth model during its first term, it garnered neither the ambition nor the time to confront the vulnerability of the country's economic structure. Spain grew thanks to low real interest rates based on the euro. The growth in credit, accountable to a great extent to foreign institutions, was skewed towards the construction and real estate development sectors.

Then came the massive external shock. The collapse of Lehman Brothers and the crisis in the global financial markets significantly reduced the country's ability to source foreign funding, followed by a credit crunch that choked off the real economy. Companies reacted to the adjustment by drastically cutting jobs, an expected solution given that a third of all positions were temporary with minimum severance pay.

At first, the government faced the crisis with discretionary counter-cyclical fiscal policies, following the recommendations of European institutions and multilateral bodies. However, the role played by automatic stabilisers in the Spanish economy, which rely to a great extent on taxation, was not fully taken into account when assessing both the adjustment in employment and the collapse of the real estate and construction sectors. This led to a budget deficit of 11.1% of GDP by the end of 2009, an amount difficult to finance. Moreover, this strategy was combined with an unparalleled anti-reform stance that on the one hand ignored the agenda that the government itself had set, and on the other broke with the reformist tradition of Spanish socialism. This period lasted roughly two years and threw the government into a downward spiral from which there was no painless exit. Sooner or later someone would have to review Spanish fiscal policy and adopt the structural reforms that the country had needed for years.

From economic to leadership crisis

This was the situation in May 2010 before the outbreak of the Greek sovereign debt crisis. The subsequent market turbulence soon indicated that Spain could not continue financing double digit deficits. The country would not only have to accelerate its proposed reform agenda but also initiate an aggressive fiscal consolidation process. It is important to highlight that these two policies are very different in nature. Structural reforms had been on the government's agenda since its first term, although without the necessary impetus. Once the crisis started the reforms should have been re-launched with a progressive orientation, even if it involved short term costs, but on the contrary, the government preferred to shelve them, classifying any reformist discourse as "neo-liberal". The effect of this decision was an immediate increase in the need for fiscal adjustment. The absence of reforms narrowed growth prospects and put the PSOE in an awkward position in the eyes of the general public, given that introducing reforms at a later stage would necessarily imply backtracking on previous positions. This profound reorientation of economic policy, almost a u-turn, took place with little or no explanation to the citizens, raising major concerns about the behaviour of the prime minister, who was seen as giving up or betraying an important part of his electorate.

This summarises two important mistakes with regard to the PSOE's electoral expectations. First, both the government and PSOE rejected any reformist attempt on the grounds of it being neo-liberal, and expanded fiscal policy beyond sustainability. This strategy had a use-by date and in May 2010 reached the point of no return. Here we find the second mistake: giving up the previous strategy without providing a coherent explanation or the needed leadership to build confidence in the new measures. Both mistakes combined simply dynamited PSOE's electoral base. Moderate voters heard no articulated discourse from the government and felt increasingly uncertain. The second mistake also distanced the more ideological voters. They supported the initial government's opposition to the reform agenda but now, confronted with more painful reform and without an explanation, simply joined the discourse of the "dictatorship of the markets", reinforced by major fiscal adjustment.

Back to the reform table

In 2011, the government maintained the reforms as planned and soon had to revise the labour market and the pension system while intensifying the fiscal consolidation process, none of these with a clear political framework. This implied that the country was heading towards one of its worse economic crises without strong political leadership, as the PSOE appeared to have given up trying to convince public opinion of the merits of its new reform agenda. With such a hopeless attitude and a youth unemployment rate hitting 40%, a new youth-based, apolitical movement took the streets in the country's major capitals in May demonstrating their anger. This movement, known as “15-M” or "indignados" (the outraged), brought the political component of the crisis back to the centre of the debate. The movement felt victim of both poor economic prospects and the absence of leadership and a transparent, credible roadmap. A part of the left joined the movement because they felt betrayed by the government’s dramatic economic policy reorientation during the previous year. The 15-M advocated a wide array of mixed proposals for improving the democratic system coupled with several less plausible economic ideas. On 22 May, local elections were held and the PSOE suffered a serious defeat. Later on, the parliament approved the latest package of structural reforms promoted by the government in the previous months and the Prime Minister was “forced” to call for anticipated general elections on 20 November.

In the 2010 local elections, support for the PSOE fell by four percentage points (from 31.4% to 25.4% over electoral roll), abstention also fell by three points despite the significant public presence of the 15-M movement. Those votes went to parties at the right of the PSOE, whose support rose by six percentage points. Parties on the left only managed an increase of 0.6 points . So even though a proportion of those disenchanted with the PSOE either abstained or voted for more leftist options encouraged by the "indignados" movement, the overall result showed a significant shift to the centre-right together with an increase in participation. This was a counter-intuitive result for the conventional wisdom of the analysts.

The tsunami which began with this result would be confirmed in the 2011 general election. The more moderate voters of the PSOE directly migrated to the centre-right. After nearly four years of crisis, with no clear end in sight and with a government that had redirected its policy without a convincing explanation, the less politicised of PSOE voters moved across to the PP looking for an alternative to fight the crisis. Meanwhile, shocked by the irruption of the 15-M, the media and PSOE leadership were analysing the likelihood of PSOE voters abstaining or shifting their vote to more leftist options. The PSOE's fourth mistake was not to notice this trend.

The PSOE plainly believed that elections are won by polarising the electorate. This strategy did not work well in 2008 and departed from the strategy that led to the 2004 socialist victory, a nation-wide campaign based on the party’s "calm opposition" to the Aznar government. Now the PSOE designed an electoral strategy which focused on the confrontation between left and right, ignoring that the majority of the electorate simply wanted a credible plan for getting out of the crisis. In this sense, the PSOE attempted a revival of the anti-reform discourse that had mobilised the country's left before May 2010, which was at odds with the socialist government's economic policy. This was also a mistake.

A political campaign must always be based on the candidate's real attributes. The electorate perceived Alfredo Perez Rubalcaba as a good negotiator, an intelligent, serious manager, who was a great Interior Minister, characteristics of a pragmatic reformer and far away from the profile that might have attracted more combative leftist voters. PSOE's turn to the left also meant going against the government's own economic policies. Counter-intuitively this went against the intention of attracting left wing voters, whom opted for what they perceived as less "opportunistic" alternatives. Moreover, this strategy constantly clashed with reality, in so far as the electoral promises were difficult to reconcile with the country's situation, generating particularly uncomfortable internal disputes between the PSOE government and the PSOE candidates, as seen when the government called for a constitutional reform to limit the structural deficit ceiling. The PSOE shifted its message to more leftist positions, a strategy that was unsuccessful with the electorate given the lack of credibility of such an ideological shift. Against this background, not even the announcement of terrorist group ETA's renouncement of violence improved the perception of the socialist candidate - Alfredo Perez Rubalcaba had in fact already overshadowed his image.

Eventually, the PSOE’s share of the vote fell by 12 percentage points. These votes were redistributed as follows: 5.7 points went to centre and centre-right parties; 2.8 went to other left-wing parties and a similar amount were abstentions and blank votes. Finally, other minor parties increased their support by 0.6 points. Therefore, it seems clear that a campaign focusing on leftist voters was not the best choice, particularly as Alfredo Perez Rubalcaba's profile was certainly more appealing to moderate voters. Ultimately a more thorough study would have to be conducted to estimate the flow of votes between the different parties.

Reinvigorating the reformist tradition in Spanish socialism

The economic crisis has provoked the fall of incumbent governments in several European countries. Nevertheless, in Spain the PSOE and its executive made significant mistakes which increased the probability of an electoral defeat. Its first term failed to profit from one of the most favourable economic periods in the country's history, as the government was dealing instead with other issues that now seem inopportune. The PSOE started its second term with a thinner majority in the Parliament, even though it had increased its number of seats. The government's initial strategy against the crisis was wrong, especially in its anti-reform stance. Later, when it had the economic policy right, it was unable to defend its position and gave up leading the country through a difficult period. Lastly, it failed to target the right voters during the election campaign. All these mistakes amplified an electoral damage that would have been already quite severe due to the ongoing economic crisis.

The party is now in a very difficult situation. Following the municipal and regional elections in May 2010, it lost control of all the large province capitals, along with every regional presidency that was at stake. It now only holds the presidency in Andalusia and the Basque Country. However, regional elections will be held in Andalusia next March and prospects look grim, while in the Basque Country the socialist government is supported by the PP in a highly uncertain environment. Terrorist group ETA’s announcement of a “definitive cessation of its armed activity” implied the emergence of Basque political organisations which were previously outlawed, whose presence in the future parliament would make maintaining the current non-nationalist majority particularly complicated.

Meanwhile, the economic situation will remain complicated for a considerable period of time yet and Mariano Rajoy's centre-right government will have to further the reform agenda. The reforms will have a clear conservative orientation and fiscal adjustment will be extended, compromising social policy in the short term and shaping a welfare state much closer to the assistance model than to the centrality defended by social democrats as a guarantee of equal opportunity and social cohesion.

It is therefore crucial that the party avoids the trap of factionalisation and infighting. This usually has no direct correlation with the interests of citizens and potential voters and creates a great barrier against political comeback – with 28.7% of the vote the party is already in a very dangerous situation. Rather, the PSOE has to undergo a process of democratic regeneration without starting a never-ending internal debate. By the same token, it has to assess the real reasons behind its electoral defeat and design new strategies to realign its agenda to the centre of the political spectrum, as it did following the defeat in 2000. This will be no easy task.

Since it was founded in 1879, however, the PSOE has managed to overcome worse situations and serve as an essential instrument for helping the Spanish people achieve their dreams and aspirations.

A contribution to State of the Left, a monthly insight report from Policy Network's Social Democracy Observatory

Jonás Fernández Álvarez, Head of the Research Unit at Solchaga Recio & Asociados