In three weeks voters in Spain will go to the polls to choose a new prime minister—either Mariano Rajoy, leader of the People’s Party, or Alfredo Rubalcaba of the governing Socialist Party. The race comes during Europe’s financial crisis and with an unemployment rate in Spain exceeding 20 percent. The European Union, International Monetary Fund, and the Obama administration have all called on Spain to curb its growing public debt, lest it become another Greece. Both candidates took time off the campaign to talk with the Washington Post’s Lally Weymouth. Excerpts follow.
Questions for Alfredo Rubalcaba
Q: In 2008, when the economic crisis stuck, Prime Minister Zapatero didn't take much action until President Obama called him in May 2010 and told him he had to do something. Then he began a serious austerity program. Do you back this program and would you change it?
A: The whole world had a financial crisis. But in Spain we had a unique element, which was the real estate bubble, which has had a tremendous impact. In fact, 90 percent of our unemployment is actually due to that property bubble bursting. We did have to introduce these austerity packages and of course public revenues dropped significantly.
Q: Would you have introduced these measures earlier if you had been prime minister?
A: It is very easy to look back and say, "I would have done it differently." But there is no use crying over spilt milk. We should have made the real estate bubble burst sooner.
Q: Wasn't the real estate bubble a private investor problem?
A: Yes but there were things we could have done from the public sector. For instance, it took us a long time to eliminate tax breaks for housing purchases, which was a perverse incentive to keep the bubble going in construction and investment in that area. It's really hard when you are in government to suddenly burst a whole economic bubble. If you do, revenues and employment drop. We were hoping for a soft landing.
Q: You have just completed a big deal with [the terrorist group] ETA. They have said they won't kill anymore but they haven't apologized or put down their arms. Was the deal acceptable to you?
A: ETA has now renounced violence because they could not continue with it. They were so weakened and their numbers were so tiny. In the Basque country there was no one left who believed their violent approach was going to get them anywhere. It's not that they suddenly got a conscience. They were just completely defeated by law enforcement. I am personally completely convinced that ETA will never kill in Spain again. It is over.
Q: Is Spain the next Greece?
Q: Why not?
A: First of all because our fundamentals are entirely different from Greece. Our accounts are accurate; we have never deceived Brussels in our figures, nor have we ever reported to the markets anything other than accurate portrayals of our accounts. Spain is completely different from Greece.
Q: Do you feel you are fiscally sound enough to satisfy the markets?
A: There is work to be done still. We will finish the year with a deficit of 6 percent, which was the target. We have another two years to bring it down to 3 percent [and] we will.
Q: You have to bring it down according to the European Central Bank targets?
A: That's right, that's the agreement with the Central Bank and the IMF.
Q: Do you think that you and your party are being punished for Zapatero's austerity program—for the fact that he cut the wages of civil servants and tried to cut the deficit?
A: It's not that. The problem is unemployment and that's what people are really angry about. We have over 4 million unemployed—21 percent. What is worse is that people tend to feel very pessimistic. We have the first generation of young people who feel that their living standards will be worse than their parents. And that pessimistic outlook is what we need to do something about.
Q: Would you be willing to change the labor laws? From what I understand it is difficult to fire anybody.
A: That's not actually true. These are two separate points. In fact, it is so easy to fire people that in two years 4 million people have been fired. We have changed the clause in labor contracts about objective dismissal, which means that if a company fires somebody because they are not making a profit, they will not have to pay [severance of] 33 days a year, but 20.
Q: Twenty days for how long?
A: For every year they worked for that company.
Q: What do you see as the main differences between you and the opposition candidate, Mariano Rajoy?
A: Certainly our social sensibilities are different. We believe you can overcome this crisis without significantly reducing basic social rights or protections. I believe that to cut spending in education is crazy. Education is the future. And to cut funding for research and development is crazy. Our health care system is cheap and very good.
Also in basic freedoms. Rajoy has already announced that he will be amending the abortion law, and I don't believe that should be changed. He is against the gay marriage act and I am not.
Q: Do you differ on the economy?
A: There are differences, too. I think we should tax the wealthier individuals in our society. I think we should have a tax on big fortunes and Rajoy does not believe so. As for the corporate tax, we should provide more tax breaks for small or medium-sized companies and take away some of the breaks from big corporations. That is another substantial difference between us.
Q: I assume that you believe that some cuts will need to be made by the next prime minister. Would you make cuts in the military budget?
A: Probably. But we can't reduce our operational capabilities. Our armed forces are professional and capable of participating in peacekeeping missions.
Q: Under your government, didn't Spain participate in the Libya operation?
A: Yes, we did. We have just withdrawn, but yes we did.
Q: Some assert that if there are too many budget cuts, this will lead to civil unrest.
A: The situation in Spain right now is complex because we do have millions of people unemployed so there is quite a lot of discontent. So far we have managed to keep social peace—to a large extent, because the major unions have made a big effort to keep the dialogue going. We were just discussing introducing more flexibility in the relations between employers and the unions, and the unions accepted these changes.
Q: Would you say that you have a better relationship with the unions than Rajoy?
A: Probably. You can say that we are closer politically to their views than the People's Party.
Q: If it were necessary to change labor laws, would be easier for your party to talk to the unions?
A: We have a very solid dialogue in labor relations. We have changed all the contract modes and dismissal and severance packages and we have also changed the collective bargaining process. But that's still to be implemented. My point is: Let's implement it. Let's see if it works.
Q: You have held four positions as a minister.
A: Yes, minister of education, speaker of the government, and then vice president and minister of home affairs simultaneously.
Q: What would you say were the most important turning points in your life?
A: As for milestones in my life, certainly the last five years in Home Affairs have been extremely important. I was in charge of the anti-terrorist policies. If there is anything at all that I might have contributed to the end of terrorism—that would be enough fulfillment for my whole political career.
Q: Rajoy is ahead in the polls. Is that because people blame your party for the economic situation and you have to pay the price?
A: Absolutely. I have a difficult battle ahead but it is so important for the country and the party. Spain needs to make significant changes and I would like those changes to be made with the same principles that have taken us this far.
Interview With Mariano Rajoy
Q: If elected, how would you get Spain's economy growing and how would you regain the confidence of the markets?
A: The main target for the next years should be growth and job creation. For that, we need investment. Investment needs confidence. In my opinion, we need several things: first, a political change; second, a government made by competent and serious people; and third, a four-year plan. … The contents of this plan should be in order of importance: first is public deficit reduction. That's where we really put our credibility at stake. I really guarantee that the public deficit is going to be controlled. … The second priority is to make credit come back. For that, we need a restructuring of our financial system. My third priority in economic reform is taxation. I don’t believe we should right away increase taxation.
Q: Prime Minister Zapatero has already imposed an austerity program and made some cuts. Would you go beyond his cuts?
A: Yes, there is no other way out. I am in favor of reducing all budget items. But the item I don't want to reduce is the pension expenditure because it affects the weakest part of society. And I would not like to reduce rights in health and education—the kind of services any Spaniard is entitled to.
Q: So you would not cut health and education beyond where they are today?
A: They are services people are entitled to have. We have to maintain those services.
Q: Do you think Spain's labor laws need to be reformed to encourage business?
A: There is one especially important reform, which is labor reform. We need to reform collective bargaining. Collective bargaining should be done inside the company and wages should adapt to different companies' realities.
Q: Currently, there is a centralized collective bargaining system for all companies and wages are not linked to productivity.
A: Yes, we have national and regional agreements. In 2009, we had negative economic growth but wages increased 3 percent. More than 1 million people lost their jobs. The adjustment was made in terms of jobs, not wages. This is something we have to change.
Q: What do you plan to do about the incredibly high unemployment rate here in Spain? How would you create new jobs?
A: We have to change economic policy: create confidence, foster investment, cut the public deficit, restructure taxation, and reform the labor laws.
Q: Who would be your Minister of the Treasury?
A: The Spanish constitution says that first I have to tell the King.
Q: Are you critical of Prime Minister Zapatero's lack of reaction to the 2008 financial crisis?
A: Zapatero has been in the government since 2004. From 2004 to 2008, he didn't do anything at all in economic affairs. Spain still was growing. I said two things to him at that time: Public expenditures were excessive and there was a lack of structural economic reforms. In 2008, Zapatero denied the existence of the crisis and continued doing nothing. Great mistake. In 2009, when everybody started to tell him that Spain was going to have a big problem, he took two decisions: first, to increase public spending, reaching a public deficit of 11 percent of GDP. I really criticized that. Second, he started a very shy, timid reform process. And all that created a lot of uncertainty.
Q: If you do what you need to do to get Spain out of this economic crisis, do you believe these measures will create civil unrest?
A: I have to do what everyone expects us to do. I think that the vast part of the Spanish society is very conscious that things are not going well, and we all have to make efforts. That's the reason I am not pessimistic about the reaction of the Spanish people.
Q: So Spain will not be the next Greece?
A: Not at all.
Q: What are the key differences between you and your opponent, Alfredo Rubalcaba?
A: The first is that my party, the Popular Party, has always managed our economy well and that is not the case for the Socialist Party. Last time we came into power it was 1996. The unemployment rate at that time was 22 percent. When we left office in 2004, unemployment was under 10 percent and now it's back to 21 percent. That is the best summary. The second [difference] is that right now, the Socialist Party does not have an economic team to help Spain exit this crisis. Thirdly, our party knows the kind of foreign policy we want to carry out. We are in favor of the euro and we want more integration with Europe—more political and economic coordination.
Q: What is your view of the recent ETA deal in which they renounced violence? They didn't apologize to the victims or put down their weapons.
A: I think this announcement is good news. We can only be really peaceful when there is an effective dissolution of this terrorist group. We must be prudent and we must remain united and enforce the law. These terrorists are still outlaws.
Q: You have held several significant government positions. What do you think makes you the most qualified person to be prime minister of Spain?
A: In the government, I have held four different ministries and also been deputy prime minister. I have won two internal elections inside my party.
Q: So your experience qualifies you to become Prime Minister? You are ready?
A: Nobody in Spain has my political career. And if I didn't believe in myself, I couldn't run for election.
Q: If you don't win a large majority, will you have to go to smaller parties to form a coalition government? Which party would be the best coalition partner?
A: I have the experience to govern with a coalition government. In 1996, we needed 20 more seats to reach an absolute majority. We were able to build a coalition with three other political parties and it worked well.
Q: But now you hope for a big enough majority so you won't need a coalition partner?
A: What I really believe is that Spain needs a strong government.
Q: Will you have a problem with the right wing of your party because they perceive you as too moderate?
A: We have more than 10 million voters. My duty is to act [on behalf of] the majority of the people, and I believe the majority of Spaniards are in favor of moderation and common sense.
Q: When did you opt for a moderate policy?
A: I believe I have been a moderate politician my whole life. What I did recently was to make an effort to show myself as I am—as a moderate politician.
Q: In economics or in all areas?
A: In all areas. Moderation is also an attitude and a way of behaving. Now ideological differences are less important.
Q: Because what matters is getting Spain out of this crisis?
A: Clearly that is the great national target.
Q: How long do you anticipate that will take you?
A: It is difficult but it is very important to create enough confidence in the first months in office. That is my target.
Q: Similar to President [Franklin] Roosevelt's first 100 days?
A: That means to tackle the issues I discussed at the beginning of this interview. The worst thing a government can do now in Spain is to do nothing.