Zapatero government collapsing; opposition may hold a vote of no confidence

[Beet]

MADRID, Feb 4 (Reuters) - Spanish unions said on Thursday they plan protests and the opposition may hold a vote of no confidence as criticism mounted of Prime Minister Jose Luis Rodriguez Zapatero's efforts to overhaul state finances.

Doubts about Spain's deficit pushed Spanish bond prices down and sent stocks .IBEX tumbling nearly 6 percent on a day when Economy Minister Elena Salgado stressed that the country was not a risk to the future of the euro and some of the allies Zapatero needs to enact austerity plans turned away from him. [ID:nLDE6132CU]

Debt markets worry that the government will struggle to cut spending at a time when unemployment is nearing 20 percent.

The largest union confederation, Comisiones Obreras (CCOO), said it would organise protest marches during the last week of February against the government's proposal to raise the retirement age to 67 from 65. "If Zapatero wants to perform harikiri and not change course, that's his decision," CCOOleader Ignacio Fernandez Toxo told a media conference, just a day before the government hopes to gather union support for proposals to streamline labour markets.

The CCOO has also called the government a "bunch of amateurs" following a series of public relations blunders related to a 50 billion euro austerity plan. [ID:nLDE6122Q0]


CRITICISM AMONG SOCIALISTS

Criticism has even arisen within the Socialist Party, with the head of the regional government of Castilla-La Mancha calling for Zapatero to make changes to his cabinet.

Meanwhile, the deputy leader of the conservative opposition Popular Party also raised the heat on Zapatero by saying that it could seek a vote of no confidence in parliament, which, if successful, would topple the government.

...

The Popular Party's opinion poll lead over the Socialists widened to 3.8 percentage points in January, up slightly from November, according to the Centro de Investigaciones Sociologicas. National elections are not due until 2012.

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http://www.reuters.com/article/idUSLDE61314N20100204

It's hard to imagine what labor unions such as CCOO are thinking. If the government falls and the PP wins power, the PP will also attempt to institute austerity measures, and it will likely have better chances of doing so more harshly without the unions even at the table.

[ag]

Wrong board

[Filuwaúrdjan]

Wrong board

Ah, but as a mod you can back up your words with action.

[Beet]

It's amusing that one of the biggest economic events since Lehman Bros. could be removed from the economics board.

[ag]

It's amusing that one of the biggest economic events since Lehman Bros. could be removed from the economics board.

There is an "economic event", but it is not the confidence vote in the Cortes. Confidence vote belongs elsewhere. If you want to discuss Spanish economic troubles, you are welcome to do it here. Thus, I will wait a bit more - if such a discussion occurs, I will leave the thread. Otherwise, I will delete it.

[Beet]

It's amusing that one of the biggest economic events since Lehman Bros. could be removed from the economics board.

There is an "economic event", but it is not the confidence vote in the Cortes. Confidence vote belongs elsewhere. If you want to discuss Spanish economic troubles, you are welcome to do it here. Thus, I will wait a bit more - if such a discussion occurs, I will leave the thread. Otherwise, I will delete it.

The issue here is the austerity plan. The markets want to see it passed to have confidence in Spain's debt rating. If the government cannot command a majority, it will not be able to pass the plan until there are new elections, which will result in further uncertainty.

This is not to discuss the confidence vote per se, but the confidence vote is of very important  significance to the economic event. The article I posted talks about both. I don't think that the economic event can be discussed fully without discussing the politics.

Also... ag... come on I have been posting around here for a long time. Have I ever shown much interest in European confidence votes? I wouldn't be posting this here if it wasn't for the huge economic impact.

In any case, I will open it up...

What do people think Spain will/should do and Europe will/should do about the budget problem?

[2952-0-0]

I know this will be sacrilegious to any EU officials, and I'm not advocating that the PIGS leave the Euro. But perhaps there should be a parallel, non-legal-tender currency in those countries to speed up the "internal devaluation" needed to bring back competitiveness. Think of the local currencies common in many college towns, except this one will be floating in value.

Perhaps Spain could create a "new" Peso, initially at a rate of 1 Peso = 1 Euro. At first, civil servants and those who receive public welfare will be partially paid in Pesos. A Peso/Euro exchange market will be created, and the Peso will be allowed to float (most likely devaluing). The supply of Pesos will boost the money supply across the country as a whole.

Businesses will quickly start posting prices in both Pesos and Euros, and as Spaniards get used to dealing in Pesos, their wage and price expectations will fall in real terms. The needed deflationary pressure is accomplished by creating a second currency which devalues just like a national currency. Throughout this time, taxes and government services are still paid in Euros, though the Peso/Euro market will be as liquid as any forex market. Once Spain has regained its competitiveness, the Peso will be abolished and converted to Euros at a cheap rate. The government will then be forced to use fiscal, rather than monetary, policy to cool down future asset bubbles.

Both tax revenues and spending will sharply fall in Euro terms, but because the Aggregate Demand is stimulated in real terms thanks to the devalued Peso, the budget might be brought up into black.