Saturday, December 24, 2011

New Government of Spain: Right Priorities, Right Direction, Right Choices?

It's hard to tell. After the national parliamentary elections a month ago, won decisively by the conservative PP (Partido Popular), Spain's new government under Prime Minister Mariano Rajoy was sworn in this week (December 21). The uncertainties surrounding the Spanish economy have made it imperative for the new government to start its mission in a convincing manner. Some characteristic changes became visible from the start: 1. reduced government size, 2. concentration of functions in fewer hands. Rajoy's first signal a few days before revealing his new team was that there would be cuts in every governmental sector except for pensions.

Indeed, according to many commentators a concentration of official power is taking place which is unprecedented in the recent democratic period. First, economic policy is shifted towards the Prime Minister (“President of the Government” in Spain's official parlance). The cabinet's interministerial council for economic policy (Comisión Delegada de Asuntos Económicos) is normally chaired by the Minister of Finance. Rajoy has decided to chair it himself. Second, the Spanish intelligence service is normally part of the Ministry of Defence. Rajoy has decided to move it to the Presidency of the Government, the cabinet secretariat, under the direct oversight of his chief of cabinet, Soraya Saenz de Santamaria (40), who is also a ministerial appointment and Rajoy's deputy (Vice President of the Government).

Finally, adding to the above is the fact that this is not a government of independent-minded technocrats (unlike the new governments of Italy and Greece). The new Ministers are highly competent and experienced, but they are PP loyalists. They are Rajoy's close collaborators from many years before. The facts seem to bode for a tight-knit, centrally steered operation, with one possible exception: The all-important Ministry of Finance.

The Ministry of Finance has now been split in two, an “externally oriented” Ministry of the Economy and Competitiveness, with Luís de Guindos as the new minister, and an “internally oriented” Ministry of Finance and Public Administration – where the new appointee is Cristobal Montoro. In its long history the Spanish ministry of finance has several times and for considerable periods actually been two units, most recently with the José Maria Aznar government of 1996-2004, so the split may be in line both with historical precedent and with a preference of the Partido Popular. But why? And are two heads better than one?

My speculation is only that, but I believe Rajoy has made the best of a difficult situation where the judgement of the markets and the international community were primary: he had one fully capable man (Montoro) who could well have filled the job alone, but had inadequate foreign language skills, and a somewhat academic profile. Then he had another (de Guindos) who had the requisite skills for (at least) part of the job, an image of investment banking experience (Lehman Brothers in Iberia, no less!) and the language abilities to go with it. So the ministry was divided to fit the needs of the situation and the capabilities of the two men, while Rajoy in doing so also ensured that he would put himself in a stronger leadership position, which was further underlined by his taking the reins of the economic policy council into his own hands.

The question then is: Can the cabinet center manage it all? There is no doubt about Rajoy's motivation, nor about the clarity of his goals. He intends to drag his country out of this crisis no matter what. However, what we know of the new Prime Minister so far is that he is not given to Reaganesque free reins and lofty thinking. His performance in parliamentary debates of the past four years – as well as in the previous election debate with Zapatero of 2008 – shows a man who is polemic and does not hesitate to dive into detail. My suspicion is that here we may have a man of pedantic leadership, a nitpicking micromanager.

Possibly to compensate for this tendency, the Vice-President of the Government has been charged with the top managerial position. She certainly has both formal competence and experience, and she has worked for ten years with Rajoy. But with all these diverse responsibilities thrust upon her, one may well ask: Is Soraya up to it? As I see it, this can only work well if Rajoy comes out as a stronger visionary than he has appeared to be in the past.

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