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Upbeat Rajoy says Spain is on the mend, despite economic woes

During his state of the union address, Prime Minister Rajoy said while 'reality is harsh,' Spain's economic recovery is certain. But the opposition – and the public – remain skeptical.

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Spain's Prime Minister Mariano Rajoy and opposition Socialist Party leader Alfredo Perez Rubalcaba speak during the State of the Nation debate at Parliament in Madrid today. Mr. Rajoy pledged on Wednesday to pull Spain out of its painful recession without relaxing his drive to cut the country's high public deficit.

Sergio Perez/Reuters

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An unapologetic Spanish Prime Minister Mariano Rajoy Wednesday tried to inject optimism into his first state of the union speech before parliament, suggesting that while much pain remained ahead, the country is on a path to recovery.

But opposition figures and Spaniards on the web reacted with disbelief and even anger, echoing the sentiments of a population tired of unmet political promises and corruption scandals that have implicated Spain’s leaders, political parties, royal family, and other institutions.

Spain’s unemployment rate tops 26 percent and rising, with nearly a million jobs destroyed in 2012 as a result of Mr. Rajoy’s labor reforms that cheapened the cost of firing employees. More than a million families are without any source of income. Evictions have become a social trauma.

During his 1.5-hour speech, Rajoy said he didn’t want to offer “empty optimism” and warned of an uphill, but certain, recovery. “There are no green shoots. The reality is harsh,” he said, but “we have left behind the constant imminence of disaster.”

“Not one minute of relaxation,” Rajoy said, because “this is only getting started.” Still, he rejected broad criticism. “We are getting it right.”

An angry response

Rajoy's governing Popular Party embraced their leader, but the opposition suggested he lacks the domestic and international credibility to put Spain on a path to recovery.

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Rajoy’s unrepentant and at times euphoric and defiant state of the union speech – which, unlike the US version, allows for rebuttals and counter-rebuttals – unsurprisingly earned angry recriminations from parliamentarians over what many, including PP supporters, consider a botched administration.

On top of the economic pain endured by Spaniards, Rajoy is criticized for his inability to manage sovereignty aspiration from powerful regional governments, as well as multiple corruption scandals incriminating the PP’s top leaders.

“The result of 15 months of PP government is an impoverished country, a defenseless population, and a saddened Spain,” said Alfredo Pérez Rubalcaba, leader of the main opposition Socialist Party. “None of this was unavoidable.”

Mr. Rubalcaba insisted Rajoy must step aside to let someone else in his party govern. But the opposition leader also reminded Rajoy, who goes out of his way to avoid speaking in public, that he has a much tougher crowd to convince. “I’m not your problem. The ones you have to convince are Spaniards.”

Rajoy’s power lies in the absolute parliamentary majority the PP holds, but three quarters of Spaniards say parliament doesn’t represent their interests, according to a poll released Wednesday. And Spaniards on the web mostly reacted negatively to Rajoy's speech and the PP – though they were equally unimpressed with the opposition.

A massive protest is also scheduled on Friday to reject Rajoy’s policies. It is backed not only by unions and left-leaning organizations, but by public servants, youth organizations, and more.

Rajoy’s response to society’s woes was defiant, passing the blame on to his predecessors. “Spaniards are not children and [they] accept the sacrifices,” he said. “Most frustrating of all is that Spaniards don’t see the results. We would like to go quicker,” but “all the energy has been dedicated” to correcting the inherited Spanish finances.

Unanswered questions

After more than a year in office, Rajoy can indeed point to some economic progress. Underneath his leadership, the deficit was decreased from the nearly 9 percent of the gross domestic product he inherited to less than 7 percent – a reduction of more than 21 billion euros. However, the deficit  remains higher than the 6.3 percent target he had agreed to with the EU.

Rajoy also said 2012 would yield a positive account balance – that is, more exports than imports – although that is mostly the result of plummeting imports. Still, the cost of borrowing for Spain and its companies is decreasing, for now averting what once appeared to be an imminent bailout.

But analysts warn the biggest risk to Spain going forward is its political ability to implement unpopular policies amid growing corruption and territorial challenges.

Catalonia, Spain’s economic motor, has legally embarked on a path toward secession. Even if it’s success is far from certain, there is growing uncertainty over the government’s ability to handle the resulting political pressure both from regional demand for more autonomy and from powerful sectors inside the PP that increasingly criticize Rajoy as weak.

More challenging still are a series of corruption scandals tarnishing the PP and Rajoy himself. The most damaging is a court-led investigation against the PP’s former treasurer, who is accused of keeping a secret, parallel accounting of party finances for almost two decades, during which he allegedly funneled 7.5 million euros in donations, mostly from the construction industry, to its top leaders – including Rajoy.

Can a country be governed while Rajoy is distracted by the corruption allegations, asked Rubalcaba rhetoricaly. “No it can’t, and that is why I asked you to resign.”

There are several other ongoing court investigations into corruption involving current and former top PP officials, and even one against King Juan Carlos’s son-in-law.

But Rajoy offered little to soothe concerns over secession or corruption, sticking instead to rehashed commitments to reform laws to increase transparency, regulate lobbies, and monitor party finances. 

“It’s not true that Spain has a generalized state of corruption,” Rajoy said, minimizing the scandals to “exceptions.”

At the end, the tit-for-tat debate pitting Rajoy against all other political groups failed to address uncertainty among Spaniards, European partners, or world markets. It just highlighted the country’s growing desperation over how and when Spain will exit its worst crisis in decades.

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