Mariano Rajoy has finally presented 2017’s budget, over half a year late. The political deadlock of 2016 is largely responsible for this delay, as is the fact that Rajoy now only commands a minority government. As a reflection of the prime minister’s compromised position, this year’s budget is his least controversial to date: nowhere to be seen are the austerity measures that made Rajoy so unpopular throughout his first term and that many feared EU pressure would render necessary again. But the veteran Popular Party leader still has some way to go before he can consider the 2017 budget a done deal.
The belated 2017 spending plan shows that the PP is being positively influenced by its dependence on other parties’ votes for passing legislation. Rajoy and Spanish budget minister Cristóbal Montoro knew, for example, that further austerity measures would never gain approval in parliament - not even with centrist Ciudadanos, the party’s closest ally.
Rajoy has also been under considerable pressure to increase welfare spending. The signs are that he’s been listening to his many critics - although probably now only because he has no choice but to. He has promised to channel more funds into helping the unemployed and to fighting child poverty, to lower VAT on theatre and concert tickets (in part reversing a deeply unpopular 2012 increase) and has given civil servants a pay increase of 1%. The latter move will in fact infuriate many Spaniards, even though inflation of about 1.5% will effectively wipe out the raise: civil servants have some of the cushiest, best-paid jobs in the country.
Rajoy’s real Everest is Spain’s unemployment problem. His PP government has been creating jobs at its promised rate of about 500,000 a year over the last few years; but because the majority of these are temporary contracts, some just for a day’s work, they’re hardly worth the paper they’re written on.
What’s changed this year? Rajoy has reiterated his promise to create a further half a million employment contracts in 2017, but has announced that 250,000 permanent positions will be given to employees in the public sector. He’s also pledged a further 8,000 jobs in the police force and in teaching. According to the Ministry of Economy, the aim in 2017 is to get unemployment down to its lowest level since 2008. For such a target to be hit, though, the long term unemployed need to be helped back to work, and exactly how the PP plans to do that remains vague, as does the amount of extra money they are prepared to set aside for it.
Although no explicit austerity measures feature in the new budget, Rajoy is still under considerable pressure from Brussels to reduce Spain’s deficit to 3.1% of GDP this year, down from 4.5% last year. As a result, the PP will not increase overall public spending throughout 2017 - a fact that his leftist opponents are likely to seize upon in the forthcoming weeks, as the proposed budget undergoes parliamentary tweaks and votes.
Indeed, it is Rajoy’s enemies in the parliament who pose the biggest obstacle to his passing of legislation, not the EU. Despite his 2017 budget being closer to what his opponents want, the PSOE and Podemos immediately stated their intention to vote against it.