Friday, December 29, 2017

The Year Before The Election

The worst case for growth of the Balearic economy in 2018 is a mere three per cent. The employers' confederation gives this as its forecast. The government is predicting 3.5%. Conservative is not how one would describe the government; its growth forecasts are invariably higher than those of analysts.

Whatever the actual growth, it will still be comparatively strong. It had always been expected that there would be a slowdown from the height achieved in 2016: 4.1% represented a remarkable recovery from how things had been five years previously when there was zero growth. So, a fall in growth can still be viewed in positive terms.

The current government has ridden the wave of economic good fortune, but the factors that have contributed to this have really had little to do with the government. They have been factors of greatly improved economic circumstance, partly attributable - say it quietly in front of a Balearic minister - to national government policies, austerity and all. But one factor stands out from any other - the contribution of tourism. In the Balearics, this has been magnified compared with much of Spain, but as the National Statistics Institute has revealed, the growth of the tourism economy since the dark days of crisis in 2010 has greatly outstripped the rest of the national economy in real terms.

It can seem perverse that the Balearic government is actively pursuing policies that might jeopardise the growth of the islands' most important sector. We all know why it is engaged in this perversity, and we all know how. Whether a doubling of the tourist tax, the rentals legislation, limits on tourist numbers turn out to harm the economy in 2018, I have my doubts. But there is a risk that there might be some harm, and heading towards the 2019 election, the government could be perceived as having willingly sought to undo the good fortune it had amassed through no real effort on its behalf.

The economy and tourism will, I suspect, be ok next year, but tourism is representative of how, politically, things might just start to unravel next year, especially if there were to be a dip. There are five ministries which in broad terms contribute to Balearic economic and competitive well-being. Tourism (and innovation and research) is one, the others are: education; employment, trade and industry; finance; and transport, energy and land (I exclude agriculture as it is of relatively minor significance).

Of these five ministries, four are controlled by PSOE, the major partner in the government. Més run tourism (and agriculture, for what it's worth). PSOE therefore have their hands on the means of moulding the economy, except tourism. Més were determined to keep their hands on tourism; hence, PSOE have had to accept Bel Busquets. They didn't want to accept her, they might even have preferred one of their own to take over from Biel Barceló. But they had no alternative. They had to accept her. If not, Més might have withdrawn support for the 2018 budget.

The politicking that surrounded Barceló's successor merely served to highlight the weakness of the coalition, and it also served as a foretaste of what could well come in 2018. The parties of government, plus Podemos, will be gearing up for the election. Points of difference will need to be made. They cannot just simply sweep the differences under the consensus and dialogue table. There are votes to be had.

The opposition have suggested that the government might not be able to agree a budget for 2019 for the very reason that the parties will be highlighting their points of difference. The opposition may be right, and for PSOE they will be emphasising their sound management of the four ministries. If the need arises, PSOE can distance themselves from tourism and they will have a readymade excuse: they hadn't wanted Busquets.

If Madrid does finally come up with a satisfactory new financing arrangement for the Balearics next year, then PSOE can take the plaudits: they do, after all, run the finance ministry (and the presidency). This financing deal is of immense importance politically. Secured, and PSOE can milk it electorally for all it's worth. All the consensus stuff can be forgotten, what PSOE will want more than anything is to be able to present the electorate with a very good reason for increasing their share of the vote. What PSOE don't want is to be as beholden to Més (and Podemos) after the election.

For Més, meanwhile, the loss of Barceló is significant. Like him or not, without him in a frontline position, Més are greatly diminished. Podemos will sense a weakness and so will PSOE. Exploiting a weakness while simultaneously boasting strengths could well define at least the latter half of 2018. The opposition isn't that strong - the PP might just decide they need a different leader; the real opposition will be within the government pact.

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