The Podemos Express: What lies behind the extraordinary rise of Spain's new protest party?

The extraordinary rise of Podemos, Spain's eight-month-old protest party, continues. A new Metroscopia poll for El País, released on Sunday, showed that the party would win a Spanish general election, if held today, with 27.7% of votes. The Socialist Party would finish second on 26.2%, followed by Spanish Prime Minister Mariano Rajoy's Partido Popular on 20.2% – less than half the 44.6% the party won in the November 2011 general election.

This is unbelievable stuff, but what lies behind the instant success of Podemos? 

As with all protest parties, there are a number of inter-related, mutually re-reinforcing causes: 

New media: Can establish and multiply protest movements in a heart beat. Italy's Five Star Movement is a well-know example. Podemos, too, has fed off this.

Corruption scandals: There have been a series of pretty big ones in Spain over the past two years (see this blog post we wrote last year, for instance). That said, though, Spanish politics have struggled with flaky politicians for some time, so this in itself doesn't answer the 'Why now?' question. 

Loss of trust in mainstream parties: This is the same story as virtually everywhere in Europe. In the Metroscopia poll we mentioned above, 42% of respondents said they were inclined to vote for Podemos because of "a feeling of disappointment and disillusionment with the other parties". 

"They're all the same": Related to the above, and especially during the post-crisis years, many Spanish voters don't see much difference between Partido Popular and the Socialist Party. Again, though, Spain has been a two-party, 'centripetal' system for quite some time, so why is it that voters turn against mainstream politicians now? 

EU-mandated austerity: This is a big part of the story, which reinforces the above point. Partido Popular and the Socialist Party are broadly seen by the Spanish electorate as implementing the same set of austerity policies. Remember, the first substantial austerity package during the Eurozone crisis in Spain was passed by the Socialist government of José Luis Rodríguez Zapatero in May 2010. 

Podemos: a 'shadow eurosceptic' party

Podemos certainly doesn't describe itself as 'eurosceptic', and it's not 'eurosceptic' in the northern European sense. Both the party and the Spanish public as a whole remain committed to the Euro. According to the European Commission's latest Eurobarometer survey, 56% of Spaniards think the Euro is "a good thing" for their country – up from 53% last year – compared to 34% who think it is "a bad thing".   

But just as with SYRIZA in Greece, a big part of the Podemos package is predicated on opposition to policies which are, in one way or another, driven by Spain's Eurozone membership – most importantly fiscal consolidation and internal devaluation.

In other words, Podemos could be described as a 'shadow eurosceptic' party.

Podemos leader Pablo Iglesias did say in a recent interview:

"The [Spanish] Socialists should acknowledge that they got it wrong with [the] Maastricht [Treaty]. They got it wrong by letting Spain be turned into a colony of northern European countries."  

Per implication, this means envisaging a Euro without the Maastricht criteria. Similarly, some of the main policy proposals of Podemos seem to be outright incompatible with Eurozone membership. For example, the party's flagship proposal is a "basic income for each and every citizen, for the mere fact of being citizens". According to the party's own estimates, the measure would cost the Spanish government €145 billion – roughly 14.5% of Spanish GDP. That would bust every EU budget rule on the books. 

Other proposals, such as more "democratic and parliamentary control" over the ECB, won't happen as long as Germany is around. 

Therefore, to a certain extent, Podemos offers voters a 'false choice': Euro membership with far-left spending policies. Interestingly, the firebrand anti-austerity talk of Podemos is already having a knock-on effect. Under the leadership of Pedro Sánchez, the Socialist Party has also stepped up its anti-austerity rhetoric. We will see if this will have an impact on upcoming opinion polls.

In our 2012 report looking at internal devaluation in the Eurozone periphery, we noted: 

"The history of the Baltic states – and to some extent Ireland – shows that large scale internal devaluation is fully possible in certain circumstances. But, against a backdrop of plummeting real GDP, internal devaluation also produces a politically explosive combination of falling wages and rising unemployment – all leading to a reversal in living standards. This is the Eurozone's great curse: do what's economically necessary but risk massive political and social fallout."

The rise of Podemos shows just how real that risk still is.

Slush fund scandal reignites in Spain, but risk of early elections remains small

UPDATE (16:00): Another interesting fact from the Rajoy-Tusk presser. When a foreign leader comes to Spain on an official visit, the protocol establishes that, at the joint press conference, Spanish journalists and their counterparts from the visitor's country are only allowed two questions each.

Today, it had been agreed that the two questions from the Spanish side would come from El Mundo and the news agency EFE. However, Rajoy unexpectedly gave the floor to a journalist from ABC.

Asked by his colleagues at the end of the presser, the ABC journalist explained that he had received a phone call from his editor dictating him the exact wording of the question he had to put to Rajoy - who then replied by reading a short written statement he had prepared.

UPDATE (15:00): At the joint press conference with his Polish counterpart Donald Tusk, Spanish Prime Minister Mariano Rajoy said, "I'm going to fulfill the mandate I was given by the Spaniards" - a clear indication that he's not planning to resign.

Meanwhile, the first details from Mr Bárcenas's court hearing are emerging. For the first time, he admitted that he was indeed the author of the 'parallel' accounting books published by El País earlier this year (see our blog from last January for further details). Mr Bárcenas reportedly also declared that he made cash payments to Rajoy himself and María Dolores de Cospedal, the Secretary General of Partido Popular, in 2008, 2009 and as recently as March 2010. 

OUR ORIGINAL BLOG POST (11:30)

Remember the slush fund scandal that broke out earlier this year in Spain? Prime Minister Mariano Rajoy and other senior members of the ruling Partido Popular allegedly received illegal cash payments from the party's former treasurer, Luis Bárcenas (in the picture). All these payments were registered in 'parallel' accounting books that were leaked to the Spanish press (see our blog from last January for further details).

After a couple of months of relative calm, the scandal is now reigniting. El Mundo yesterday published several screenshots from Mr Bárcenas's mobile, allegedly showing that Rajoy sent him supportive text messages after the scandal was exposed - the most recent one in March - and asked him to keep calm and deny the existence of the secret accounting books.

Unsurprisingly, the opposition Socialist Party has called for Rajoy to resign "immediately" in light of the latest revelations. Equally unsurprisingly, Rajoy's office denies any wrongdoing and accuses Mr Bárcenas of trying to "deviate attention" from his own judicial problems.

So what happens next? The following points are worth keeping in mind:

• Partido Popular holds an absolute majority in the Spanish parliament, so it looks quite hard for the opposition to force Rajoy out. Indeed, the Spanish Prime Minister could still choose to step down voluntarily or be forced to do so by his own party - but neither option seems to be on the table at the moment;

• Even if Rajoy resigned, he would have the right to indicate his successor - and the King of Spain would have to appoint this person as the new Prime Minister until the end of the current parliamentary term;

• Crucially, the Socialist Party itself has made no mention of early elections so far. They simply want Rajoy to quit and be replaced by someone else from his party. An understandable position, given how badly the Socialist Party is doing in the latest opinion polls.

Therefore, the risk of snap elections remains small for now - although the scandal will inevitably cast a shadow over Rajoy's government, at least until things become clearer.

Today, all eyes in Spain will be on two key events: Mr Bárcenas is due to appear in court, and is expected to provide some more details about the latest events. To add a further twist to the story, his lawyer yesterday said Mr Bárcenas didn't know anything about the publication of his exchange of text messages with Rajoy by El Mundo.

The Spanish Prime Minister is also due to speak in public, in a joint press conference with his Polish counterpart Donald Tusk - which is also going to be interesting. We will keep a close eye on anything coming from Spain throughout the day, so keep following us on Twitter @OpenEurope and @LondonerVince.

Spain's slush fund scandal: This is not going away soon

New interesting details have emerged on the slush fund allegations involving Spanish Prime Minister Mariano Rajoy and his Partido Popular (PP). The party has said that it will take El País to court, because the 'secret' accounting books allegedly held by PP's former treasurer Luis Bárcenas are fake. However, the paper today reports that a couple of senior members of Rajoy's party have admitted that they did receive the payments registered in the books under their names.

A spokesperson for Pío García Escudero, the speaker of the Spanish Senate, said that Escudero actually asked the party for a 5 million pesetas (some €30,000) loan in 2000. He needed the money to repair his house in Madrid, which had been destroyed by an attack from Basque terrorist group ETA. Escudero says he paid the loan back in instalments of 1 million pesetas each, and stresses that he never dealt with Bárcenas personally.

Similarly, people close to Jaume Matas - a former Environment Minister and President of the Balearic Islands region - have confirmed that the party agreed to pay him some sort of 'transition allowance' between when he quit the cabinet and when he became PP's candidate for President of the Balearic Islands. Now, El País notes that Matas stepped down as Environment Minister in March 2003 and was elected as President of the Balearic Islands in May 2003. Perhaps just a coincidence, but the €8,400 payment to Matas is dated 2 April 2003 in the books.

Interestingly, during her press conference yesterday, the Secretary General of PP María Dolores de Cospedal (pictured) was asked about Escudero's admission. She said that specific payment "may be true", but this does not automatically validate the documents, because "some people ask for money in advance, this happens in all companies. It's no extra pay." Not an entirely convincing answer.

One last aspect is worth flagging up. El País stresses that, according to the Spanish law on the financing of political parties in force from 1987 to 2007, donations larger than 10 million pesetas (around €60,000) were forbidden. Therefore, 70% of the donations disclosed by the paper would have been illegal at the time when they were made - potentially quite a strong incentive to try and hide them in 'parallel' accounting books. 

Rajoy has convened a meeting of top members of his party, scheduled for tomorrow - but has yet to announce when (and if) he will speak to the press on this issue. Meanwhile, hundreds of Spaniards protested outside his party's headquarters in Madrid yesterday and called for him and his cabinet to resign immediately. This story is getting increasingly interesting, and is not going away anytime soon.  

EP Vice-President: send the military police to Catalonia

What happened to the EU as a peace project? 

To many of our readers, Alejo Vidal-Quadras (see picture) will not ring a bell, but he is one of the Vice-Presidents of the European Parliament, and a member of Spanish Prime Minister Mariano Rajoy's Partido Popular. In the category 'unhelpful comments', Señor Vidal-Quadras has hit the jackpot.

Commenting on the tense situation in Catalonia - and the recent calls for a referendum on independence - he said,

Things must be said clearly. The [pledge to call a] referendum is illegal. An institution of the Spanish government, the Catalan parliament, has made a decision against the existing system.

Further to taking this decision to court, the government has to get in touch with [Catalan President Artur] Mas and tell him, ‘What you’ve done breaches the law. Rectify it, or else we will have to intervene’. If [Mas] refuses to do so, the [Spanish] Senate seats, votes, the [Catalan] parliament is dissolved, the Catalan government goes home and a delegation of the [central] government takes over power in Catalonia.

A Brigade General [of the Spanish Guardia Civil]…takes over from the Mossos d’Esquadra [Catalonia’s regional police corps]. And that’s it. If people take to the street, so be it, but they can’t go on demonstrating for more than a month. Demonstrations don’t feed the people. If [the Catalans] persist with this rebel attitude, the government has to intervene in the rebel region.

Vidal-Quadras is Catalan himself, by the way...

Now, this is a very tricky debate involving a huge number of aspects. But, unsurprisingly, Vidal-Quadras was shut down by his own party. In a TV interview this morning, Alicia Sánchez-Camacho (the leader of the Catalan branch of Partido Popular) said Vidal-Quadras was speaking in his personal capacity, as he does not hold any 'significant' position within the party - which goes to show how important many national politicians consider the European Parliament to be... 
 

Spanish deficit: The saga continues

Keeping count of how many times Spain's deficit targets and forecasts have been revised has become a challenging exercise. Following the publication of its draft budget for 2013, the Spanish government has admitted that Spanish deficit at the end of this year will be as high as 7.4% of GDP - with the EU-mandated target fixed at 6.3% of GDP - once the potential losses on the government's recent cash injections in the banking sector are taken into account.

However, pending official confirmation from the EU's statistics body, Eurostat, it looks like aid to banks will not be counted in the Excessive Deficit Procedure (EDP) currently open against Spain. Speaking after his meeting with Spanish Prime Minister Mariano Rajoy yesterday, EU Economic and Monetary Affairs Commissioner Olli Rehn suggested,

It can be expected that this kind of element of increase in the fiscal deficit related to bank capitalisation will be treated as a one-off and will not affect the structural deficit.  

We would not be too sure that this settles the question, though. First of all, the EDP covers more than just the structural deficit while other one off impacts (such as Portugal's transfers from its pension funds) have counted towards reducing the deficit. Secondly, it will be interesting to see how Germany, Finland and others will react - given that, in practice, Spain has just said that it will fail to meet its deficit target again.

In the meantime, as we pointed out on this blog last week, the time for big decisions is approaching for Rajoy. The results of the stress tests have been published, and the draft budget for 2013 has been unveiled. In particular, both the European Commission and Spanish Economy Minister Luis de Guindos have stressed that the measures planned by Madrid for next year go "beyond" the recommendations Spain has been made under the new 'European Semester' - potentially paving the way for an EFSF/ECB bond-buying request without unexpected additional conditions attached to it.

Unsurprisingly, rumours of an imminent request have kicked off. According to a senior European source quoted by Reuters,

The Spanish were a bit hesitant but now they are ready to request aid.

With the next meeting of eurozone finance ministers taking place on Monday, this weekend looked perfect for Madrid to apply for an EFSF/ECB bond-buying programme. However, Rajoy reportedly told a meeting of regional Presidents from his party that he would not make the request this weekend. During a press conference less than an hour ago, he also replied with a curt 'No' to a journalist asking whether the request was "imminent."

The domestic political reasons for a delay in the decision (key regional elections in Basque Country, Galicia and Catalonia over the next two months, plus the obsession with avoiding humiliación) are well-known. Apparently, Germany is also standing in the way. Sources have suggested that the German government is keen to "bundle" Spain, Cyprus and Greece into a single dossier, rather than submitting individual aid requests to the Bundestag for approval.

Beggars cannot be choosers, and Rajoy cannot simply ignore Germany's reservations. Luckily for him, they could even turn out to be convenient on the domestic front. As in previous instances, though, the markets will likely play a big role in the timing of any bailout: a sharp surge in Spain's borrowing costs could certainly precipitate a request. Should this happen, Rajoy would find plenty of occasions to present a formal request for aid - the next one potentially being the EU summit on 18-19 October...