Budgets on thin ice

27 October, 2020

Sánchez and Iglesias have just made the first presentation of the Spanish budget agreement. In the absence of further details, what has been shown are some transitional budgets, in which they hint at intentions but, above all, try to calm down the waters of an increasingly violent latent tension.

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There is no social turn. The promised good news for the workers means a reduction of the squeezing at some of the spots where the situation was suffocating. The minimum living income decree reform, promises to temporarily remove some of the obstacles that blocked access to the most pressing victims of the present recession; the increase in minimum non-contributory pensions remains at 1.8% and that of the IPREM (Multiple Effects Public Income Indicator in Spanish) at 5%, that is to say, far below what would make it possible to bring the poorest layer of pensioners closer to the minimum wage – as was originally promised – or to guarantee that low-wage workers under temporary layoffs will be able to support their families.

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They are very careful not to bother the high incomes with taxation, the tax rinses of the corporate bourgeoisie and the profits of the companies.

The reasons for not touching too much the budgets

Official unemployment data, Spain

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The government tries above all to contain increasingly explosive economic and social tensions. It can buy that time because it relies on the recovery funds, which, although insufficient to reverse the recession, will allow the government to avoid further accelerating the effects of the crisis. It seems that the fear of a social explosion – that is, a cluster of outbursts by the petty bourgeoisie and the workers – is shared with Brussels, which has given it permission to issue debt against the promised money while the internal battle between states is being settled, delaying the mechanisms necessary for them to become effective.

On the one hand, although the temporary layoffs keep concealing the true state of the labor market, it is evident that unemployment tends to rise even more abruptly than during the last recession. And in a situation like the current one in which the pandemic necessarily reduces the capacity of the hotel and tourism industry, the fall in wages does not make hiring more attractive. Why would they hire more if there is no demand for the already existing productive capacity?

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The danger posed to the state by the potential response of workers to the degradation of their working and existential conditions is joined by the Damocles sword of a continental financial crisis. The ECB is already talking openly about such a financial crisis as an immediate possibility. The project of creating a European “bad bank” that will buy all the bad loans to clean up the balance sheets, which until yesterday the ECB rejected as heresy, is now official doctrine. According to the ECB itself, bad loans could reach 1.4 trillion euros in a serious but plausible scenario. A figure which, it recalled, is well above the levels of the financial and sovereign debt crises of the EU in 2008 and 2011.

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And last but not least, the petty bourgeoisie, whose revolt during the last crisis continues to haunt it in the form of an unstable parliament and territorial tensions.

But the fact is that the petty bourgeoisie is already strongly suffering from the recession: from the unpaid credits of small industries and retail to the disappearance of a part of the agrarian petty bourgeoisie in the hands of capital funds invested in large estates, nothing indicates any appeasement.

The government has given the a autonomous regions 50% of the recovery funds as a way of trying to win over the complicity of the regional petty bourgeoisie, something needed to pass budgets. It has even shown itself willing to pardon the Catalan pro-independence politicians. But the swords remain raised and the new government of the Generalitat does not hesitate to proclaim its willingness to reopen hostilities.

But this is only part of the revolt of this extremely diverse and fragmented class. It is very interesting for example how hoteliers, usually right-wing aligned and comprising Vox’s voting base in many regions, now demand state intervention to force their landlords to renegotiate rental agreements. We see here the other dimension of the petty bourgeoisie’s revolt, the one that demands state protection from the really existing market. In Catalonia they have already managed to get the regional government of the Generalitat to force a 50% reduction in the rent of closed premises. Now they want to extend it to the whole of Spain.

Another expression of this discontent of the petty bourgeoisie is Vox. The PP, after staging a resounding break in the motion of censure, has begun an open campaign to try to absorb the social base of the ultra-nationalist party underlining that the differences that separate them are those that differentiate an institutional party from an anti-system party. But, while the big companies and funds support the decanting of the PP from Vox, the big family business is reluctant. This segment of the petty bourgeoisie includes large family businesses and brands that have not yet been listed and are therefore outside the direct control of finance capital and excluded from the ruling class. They form the nucleus of independent family capitals that the PP needs to attract if it wants to dislodge the right-wing, nationalist wing of the petty bourgeoisie revolt politically represented by Vox. But, obviously, this is no easy task. And it does not look like there will be a quick success. That segment of the petty bourgeoisie fears taxes and regulations first and foremost and sees the government and any approach to it as part of a blaming of free enterprise which ends up worsening its bottom line.

The intent

The Ministers of Social Security, Escrivá, and Economy, Calviño.

The prudence of the budgets towards the workers does not take away from the fact that the government is sending signals about its intentions. We see it in the reform of the contributions of the self-employed: the ministry proposes to raise all the contribution bases above the minimum wage. That is, to put in the same bag a part of the most precarious workers with the commercial, professional and corporate petty bourgeoisie who use this system of contribution. The increase in the bases would mean an income of 2 billion euros a year for the state. But at the moment it is only a proposal…

But where the aims are clearest is in the pension reform. For the moment it will be passed onto the next political moment… but at the same time the government sends to Brussels documents accrediting its will to organize a solid complementary system of employment funds in the business or sectorial sphere.

What is this? The development of the plan to establish the Austrian backpack that had already been sent last year. And just in case there were any doubts about it:

The draft bill of the General State Budget will include a “mention” regarding the creation by the Administration of an open-ended occupational pension fund that will be subscribed to within the companies by their staff and that will be aimed, in particular, at achieving the expansion of this form of supplementary retirement savings for employees of small and medium-sized enterprises (SMEs) and self-employed workers. […] The possibility is being studied of mandating that all companies have to subscribe to these models, create a plan with public control that could be contracted by default, and even have the government make direct contributions to the workers’ private plans.

Running on thin ice

The general feeling is that the government needs to run faster and faster on thin ice. Despite the triumphalism and the famous morale of victory, it has increasingly dangerous cracks at its feet every day. The more it tries to get away from them, the faster it tries to run away from them, the harder it steps on a barely solid ice. The question at this point for them is not whether the ice will hold, but where it will break.

After imposing hundreds of deaths a day in order to save the economy, that is to say, save the profitability of their investments, letting go of responsibility, downplaying the importance of figures and sending everyone to work, go to class and consume, it is clear what will be the first dead weight that the government will let go of when it ceases to be able to make its ends meet: active workers, pensioners, unemployed families, young people looking for their first job…