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10/27/2011

Wall Street Journal Europe: A Conservative Front-Runner for Premier Has Emerged Amid Economic Turmoil

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EL VENDRELL, Spain—Mariano Rajoy looks set to become Spain's next premier after moving his conservative Popular Party closer to the center, but the longtime politician will face a big challenge of overhauling one of the euro zone's largest ailing economies.


Popular Party leader Mariano Rajoy, major Spanish political figure, is predicted to become Spain's next Prime Minister after the Spanish elections on November 20. Rajoy's party holds a 15% lead in the polls at this stage. Photo by Gerry Dawes©2006 / gerrydawes@aol.com.  (This photo is not a part of The Wall Street Europe article.)

Formerly a peppy growth engine, Spain is now at the core of the euro zone's sovereign-debt crisis after the collapse of a decadelong housing boom sent unemployment spiraling and punched a large hole in its public-sector accounts. International investors worry Spain will struggle to close a budget gap that stood at more than 9% of gross domestic product in 2010, revitalize its sluggish economy and create jobs—further complicating efforts to stem the region's debt turmoil.

Although the incumbent government of the Socialist Prime Minister José Luis Rodríguez Zapatero last year pushed through budget cuts and politically painful overhauls such as an overhaul of the country's rigid labor laws, many economists view these measures as too little, too late.

Mr. Rajoy has promised to tackle Spain's economic problems with renewed vigor and his party's economic pedigree lends him credibility, analysts said. The PP-led governments of José María Aznar from 1996-2004 are remembered for far-reaching overhauls that helped set the stage for a lengthy economic boom. Mr. Rajoy headed various ministries during that time.

On the campaign trail in Catalonia, Spain's second-most-populous region and industrial heartland, Mr. Rajoy spoke at a lunch with local business leaders last week about the measures he advocates for small businesses, including tax breaks for job creation and reinvested profits and a reduction of bureaucratic red tape.

"Catalonia is a land of entrepreneurs," Mr. Rajoy told a few hundred guests in a makeshift auditorium in the town of El Vendrell. "Entrepreneurs must be in the sights of any government."

The speech got a favorable reception. Josep González, head of the PIMEC small-business association, said Mr. Rajoy inspires confidence. "Right now, everyone wants a change and a package of new anticrisis measures," he said.

In an interview, the 56-year-old politician pledged decisive action to meet Spain's European Union commitments, which include reducing its deficit to 3% of GDP by 2013, if he is elected. Other priorities include cleaning up and recapitalizing Spanish banks and a new, deeper labor overhaul, after Mr. Zapatero's efforts failed to solve many of the job market's toughest problems. "We will have to take many measures right away. Others will be taken throughout the next four years, but many will be taken in the first 100 days," he said.

Ahead of the Nov. 20 general elections, the PP holds a commanding lead of around 15 percentage points in recent polls. Although Spanish elections have at times produced unexpected results, many analysts expect the PP to win and possibly obtain a parliamentary majority, which would make it easier to govern.

Mr. Rajoy's party is being helped by the electoral collapse of the incumbent Socialist party as it suffers from Mr. Zapatero's handling of the economy. For much of 2008, when Spain's budget deficit hit 11% of gross domestic product and unemployment nearly doubled to 14%, the prime minister refused to acknowledge the severity of the crisis, referring to it as an economic slowdown. Mr. Zapatero said he wouldn't seek re-election earlier this year, and his party chose veteran politician Alfredo Pérez Rubalcaba as its candidate.

But the PP is also reaping the rewards of Mr. Rajoy's strategic shift after he lost the 2008 national election to Mr. Zapatero, primarily because of strong showings by the Socialists in Catalonia and Andalucia. It was Mr. Rajoy's second loss to Mr. Zapatero, after the Socialist leader came from behind to win in 2004.

The 2004 result was widely seen as influenced by the bungled response by Mr. Aznar's PP-led government to the Madrid train bombings days before the elections. But the 2008 defeat triggered an internal push to oust Mr. Rajoy, perceived by many party members as too timid in his opposition to Socialist policies like gay marriage, greater autonomy for Catalonia and negotiating with Basque terrorist group ETA.

Mr. Rajoy fended off the challenge to his leadership by rallying his own supporters and then opted for a still-more-conciliatory stance on traditional hot-button issues for Spain's right-wing sectors. He reasoned that the high-voltage rhetoric urged by some in his party alienated many voters, especially in places like Catalonia, an independent-minded region with its own language. In an effort to modernize his party, he also brought women to the front lines, naming María Dolores de Cospedal its No. 2 official and Soraya Sáenz de Santamaría its parliamentary spokeswoman. Today, with his standing in the polls, Mr. Rajoy enjoys the full support of his party.


Mariano Rajoy and Manuel Fraga Iribarne, former Minister in Dictator Francisco Franco's regime, President of the Xunta of Galicia from 1990 to 2005 and now a Spanish Senator, at the Festa do Albarinho in Cambados, August 6, 2006.  Fraga will be 89 years old on November 23, 2011.  Photo by Gerry Dawes©2006 / gerrydawes@aol.com.  (This photo is not a part of The Wall Street Europe article.)

"I think Spanish society is moderate, it just wants problems solved," Mr. Rajoy said. "It wants a moderate tone, which also fits my personality better."

Mr. Rajoy's new style was on display last week when ETA announced an end to its violent campaign for Basque independence. The PP leader welcomed the news without reservation, while some other politicians and conservative media commentators demanded the group move quickly to decommission its arms and ask its victims for forgiveness.

Nonetheless, some people inside and outside of the party still question whether the veteran politician with the dour expression and grizzled beard has the strength and charisma to marshal support for politically difficult budget cuts and economic overhauls.

"I don't know if he is capable of exciting and galvanizing Spanish society," said Emilio Lamo de Espinosa, a sociology professor at Madrid's Complutense University.

Others say his conciliatory approach will serve him well. "He is somebody who is careful to not create problems where they didn't exist before… he needs to be tough but moderate," said Víctor Pérez-Díaz, head of consultancy Socio-Political Analysts. -- Wall Street Journal Europe
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