Good news abroad and many complications at home a year before the general campaign begins if they follow the schedule set. Pedro Sánchez once again trusts his future for the final stretch of the legislature to the response that the EU is going to give to the energy crisis, which is increasingly closer to what is defended by the Spanish Government. After twelve months of escalating prices and a war at the gates of Europe, the community institutions are now open to intervention and market reform, which until recently were anathema in Brussels. As in the pandemic, the socialist leader faces the consequences of the war in Ukraine with an adverse scenario in national politics, without any support from the right, and, this is the novelty, with the polls against it due to the ‘effect Feijóo’ that brought about the dismissal of Pablo Casado in the PP. The fear that inflation will make a dent in the pockets of citizens shakes a government that, on the other hand, has more and more international recognition and influence and that inspires many of the measures that have ended up being applied on the continent -from the energy, to the common debt for some recovery funds in which Spain is being a pioneer, through support for schemes such as ERTEs during the pandemic.
The EU knocks down another liberal dogma and opens to intervene in the electricity market after a year of price escalation
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With an opposition rooted in the ‘no’ and juggling each negotiation with the allies to carry out each parliamentary initiative, the pressure that the president has within the borders dissipates when Spain holds summits such as NATO and is congratulated by all the participating countries or go abroad: this very week he was invited to the cabinet meeting of the main power of the EU, Germany, in a clear gesture of support for his policies.
A situation in which the PSOE intends to take electoral advantage at a time when the polls have turned uphill. The sentiment of many of its leaders was expressed on Twitter by the Asturian president, Adrián Barbón. “I do not remember a similar event in our political history: today the President of the Government of Spain, Pedro Sánchez, participated in the meeting of the German Council of Ministers to address the European energy crisis and the National Security Strategy,” he wrote on the invitation. from the chancellor, Olaf Scholz, to the Spanish president to form a common front with which to pressure Emmanuel Macron to accept the Midcat gas pipeline that would facilitate the shipment of gas from the Iberian Peninsula to central Europe at a critical moment due to dependence on gas Russian. The diagnosis is shared by other leaders who draw attention to the difference in Sánchez’s assessment in Europe and in domestic politics.
While the political and media right has tried to ridicule every measure that the Government has proposed to face the energy crisis, the coalition receives oxygen from the community institutions. The European organizations that have systematically denied the fateful forecasts of the PP, especially the president of the European Commission, Ursula Von der Layen, who has flattered Sánchez and has come to ensure that Spain “is an engine of the EU” . The praise comes from a leader of the European People’s Party, Merkel’s minister between 2013 and 2019, and little suspected of embracing the anti-system policies that PP, Citizens, Vox and their related media attribute to the coalition government.
In Moncloa they show off the recognition that Sánchez has at an international level. “He has done things that no one can allow,” point out socialist sources in reference to the blows on the table that the president has given on some occasions, such as when he forced a technical stoppage in the European Council in which the ceiling of the gas or the refusal to the terms in which the European Commission initially proposed the energy saving plan.
During the four years he has been in power, Sánchez has boosted his international profile and now aspires to lead the Socialist International. “The Spanish will value the influence of President Sánchez in Europe,” these same sources predict as a result of the EU’s decision to intervene in the energy market, something that the Spanish president has been defending since last autumn. In fact, when closing the political course, he announced that he would fight in Brussels to decouple gas from the price of electricity throughout the EU, as is now happening in a limited way in the Iberian Peninsula and the establishment of a cap on the price of emissions of CO2. In the first act of the ‘Government of the people’ campaign launched by the PSOE, Sánchez asked the European Commission to “once and for all make the energy reforms that Spain has been asking for for months to defend to the working middle class and the productive fabric”.
In the Government they are now enthusiastic about the position of the Community Executive because they consider that it agrees with them again in the face of criticism from the PP, which had questioned the intervention of the energy market just as it abstained in the vote on the decree in which introduced the cap on the price of gas with which electricity is generated and which has meant a significant reduction in the electricity bill, compared to what other countries in our environment such as France, Italy or Germany are paying. The PSOE has taken advantage of it by asking the PP, in the mouth of the spokeswoman, Pilar Alegría, to join the “path of useful politics”: “If they don’t know how to do it, they have it very easy, they can go to Brussels or telephone the president of the European Commission, Ursula Von der Layen, because it is within the European Commission that the same measures that are being approved by the Government of Spain are being approved”.
The joys that Sánchez obtains abroad, including the success of the NATO summit that served as a showcase for him with the allies, contrast with the domestic reality where the PSOE has lost its status as the first force. No survey today reflects the growth of the PSOE due to the measures it is carrying out while the PP’s speech is permeating the polls. In Moncloa, however, they are convinced that they will end up unmasking Alberto Núñez Feijóo (hence, Sánchez has picked up the glove to debate him in the Senate because he is convinced that he will emerge victorious). “Have no doubt that we are going to turn the polls around,” predicted the socialist spokeswoman, Pilar Alegría, upon returning from the summer break after Sánchez asked his team for an effort and guaranteed that he returns with renewed strength.
After undertaking a new remodeling to try to enhance communication, the PSOE tries to activate the machinery with an eye on the municipal and regional ones. Throughout September and October it intends to finalize the candidacies to put the party in tune and has launched the campaign ‘The Government of the people’ with which it intends that Sánchez and the rest of the leadership step on the street explaining the measures put in place and the economic data related to employment or growth that, in his opinion, dismantle the catastrophic opposition of the PP. In Moncloa they also breathe a sigh of relief having recovered ERC for votes in Congress, they recall that, despite the complex arithmetic, they have already carried out 160 regulatory projects, and they take it for granted that they will approve the General State Budgets with the usual allies of the coalition.
In the Government they know that the next few months are key to curbing the story of the “change of cycle” that the right wing is trying to impose. Although they believe that inflation will be reduced, they are aware that the game is largely played out in the progress of the economy and the path threatens to curve for the remainder of the mandate if prices continue to grow above 10%. The European Central Bank has announced a change in monetary policy with which it intends to deal with inflation. For the first time in 11 years, there has been a rate hike, of 0.50 points in July, the highest in 22 years, and with this, it puts an end to the purchases of public debt that began at the beginning of the pandemic. The goal is to control inflation but it threatens to chill the recovery and poses a problem for those with debt. The prognosis, according to the Bank of Spain, is that energy prices will not fall and families will suffocate.
The ECB has also announced that there will be another rate hike in September, although it has not yet quantified how much, and that it ends the purchase of debt that has alleviated the fiscal effort of the States since the start of the pandemic. However, the ECB has opened up to the possibility of resuming purchases in certain jurisdictions if necessary – such as the cases of Greece, Italy, also hit by the political crisis. or Spain if risk premiums begin to skyrocket – through a new instrument, the TPI, which in principle does not have a limited endowment.
The ECB –as the FED and the Bank of England have done before– is trying to puncture the inflation balloon by lowering the incentives for consumption by raising the price of money, even knowing that this could slow down the recovery and that prices of energy have to do with many factors, including the war, beyond consumer demand. Appreciating the euro, moreover, can bring about a drop in the prices of supplies that are bought with dollars on the international market.
A consequence of all this is that, although the forecasts of the international economic institutions are of growth for Spain, they have been corrected downwards – like the rest of the EU – and the great problem at the internal level is the perception of citizens that there is less money because the shopping basket goes up. In fact, consumption data already shows a decrease in family spending to support inflation.
In parallel, Sánchez is counting on the suspension of fiscal rules until 2024. Being the country hardest hit at the start of the pandemic crisis – and with growth in 2021 that did not cover the drop in GDP that occurred in the health crisis , something that will not take place until the second half of 2023, according to the European Commission–, the Government has fought for that solution that in Brussels is already being warned that it will not be carte blanche for public spending: the fact that it can continue spending does not it means that we have to spend, is the mantra that is repeated while the discussion on the reform of the Stability and Growth Pact is also being held. Spain wants the reform to be prior to the reinstatement of fiscal rules. In other words, when the Stability Pact has to be reactivated, be it with reformed regulations and not the current ones, which in addition to setting a debt ceiling –60% of GDP– and a deficit limit –3% of GDP–, require a hard reduction path.
In this sense, yes, the European Commission asks Spain for moderation in spending so as not to increase the debt and, specifically, guarantees of sustainability of the pension reform, in particular its indexation with the CPI at a time of peaks of inflation. A pension reform that is another milestone in the recovery plan, for which Spain can receive another 12,000 million in 2023 and that will be discussed with Brussels so that the disbursements are released.
Opposite, Feijóo and the PP do not give any clue that they are going to lend a hand, and have even begun to shake the ghosts of a recession at a time when Spain registered employment figures not known since 2008 and records of indefinite. Your candidate already knows what it means to exploit an economic crisis to come to power, as he did in Galicia in 2009. To do this, he has even allowed himself to vote against the energy saving decree required by Brussels without proposing any short-term adjustment measures . The domestic polls at the moment endorse the strategy of the new leader of the PP, which goes through blaming Sánchez for imported crises, such as the war in Ukraine, just as they did before with the pandemic.
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