MADRID, Spain: Spain felt the multi-faceted fury of the financial crisis yesterday as borrowing costs surged, protesters rallied and a political rift widened with debt-ridden Catalonia.
Hundreds of protesters gathered in Madrid to protest against austerity measures, vowing to take their complaints to the lower house of parliament, the Congress of Deputies, in the city centre. Spain’s new conservative government has been cutting pay and raising sales tax in an effort to reduce debt.
Police cut off main routes to the Congress with a double layer of metal barricades, backed by vans and with a helicopter hovering overhead.
Rallying outside the city’s Atocha railway station, Carmen Rivero, a 40-year old photographer and “indignant” anti-establishment activist, said she travelled overnight in a bus with 50 protesters from the southern city of Granada to make her voice heard.
“We think this is an illegal government. We want the parliament to be dissolved, a referendum and a constituent assembly so that the people can have a say in everything,” she said.
“We don’t agree with the cuts they have made.”
The challenges to Prime Minister Mariano Rajoy’s government were multiplying even as it hoped to avoid a full-blown sovereign bailout, seen by many investors as inevitable.
It has refused to be rushed into seeking a full-blown sovereign bailout until it knows the conditions.
“Investors remain concerned by the situation in Spain. Many are beginning to get impatient because the Spanish government has not taken the step and asked for a full-blown rescue, something that has been discounted for weeks as being inevitable,” said a report by brokerage Link Securities.
“Nevertheless, all the signs are that the Spanish executive is trying to avoid that possibility,” it said.
Rajoy’s government, facing growing resistance to austerity measures aimed at curbing the public deficit, is reluctant to submit to specific conditions imposed from the outside and it has ruled out cutting pensions.
In fact, even as the government prepares to release an austerity budget for 2013 tomorrow, Deputy Prime Minister Soraya Saenz de Santamaria said that pensions would be going up. A new level for pensions would be decided in November, she told private Cadena Ser radio.
While the government is standing by its preelection promise to protect pensions, it has enacted a series of other painful measures including public sector pay cuts and a substantial increase in sales tax.
At the same time, the government is faced with growing pro-independence stirrings in Catalonia, fuelled by a sentiment that it is getting a raw deal from Madrid in the crisis.
Last month, Catalonia was forced to reach out for 5.0 billion euros from the liquidity fund to make repayments on its 40-billion-euro debt, equal to a fifth of its total output.
The region, whose capital is Barcelona, complains that it gets far less from Madrid than it pays in taxes.
But a bid by the region’s president Artur Mas for Catalonia to be given the power to levy and spend its own taxes was flatly rejected last week by Rajoy, who said there was “no margin” for negotiation.
The Catalan parliament opened three days of debate on Tuesday to consider its next steps.
Opinion polls show growing support for independence in Catalonia, but the Spanish constitution bars even holding a referendum on the matter.
“I think this debate, at this time, is creating tremendous instability,” the deputy prime minister said.
“What we have said to Mas is: ‘Think carefully about the situation the country is in’,” Saenz de Santamaria added. “With all these actions a new crisis is beng added to the crisis.”
Spain feels the heat of crisis as people hem in Parliament
