New power of the euro

In one of his rare public explanations of his criteria for guiding economic policy, Mariano Rajoy expressed his fervent support without either intellectual or political reservations for the plan of Angela Merkel and Nicolas Sarkozy to end the chronic instability that has plagued the sovereign debt markets, and put an obstacle in the way of economic recovery. Behind this unmitigated support lies a solid political reason: if there are to be two Europes and two euros, then Spain wants to be among the chosen ones. In order to achieve this, sacrifices will be required, including those already in place as well as those agreed by the European Council during the meeting that started on Thursday.

It is ironic that in this undertaking Rajoy and José Luis Rodríguez Zapatero have at last found common ground. Such conciliation would have found a warmer reception at the start of 2009 when the terrible impact of the financial crisis and the recession were already evident.

For the new government due to take over on December 22, the imposition of new stability conditions for the euro presents an invaluable political boon. It dictates the ineluctable path to be followed; that of an even more drastic adjustment than the previous one. But at the same time, it will shelter the PP government from the political costs of spending cuts. If it wants to comply fully with the deficit-reduction target under European vigilance and avoid the automatic sanctions proposed by the French-German alliance, Rajoy's government will have to cut spending on health and pensions, and also increase taxes. That is to say, it will have the endorsement of Europe to do exactly the opposite of what the PP promised in its electoral campaign, which was to increase pensions and lower taxes.

Suddenly, voices within the PP and allied media highly critical of the Socialist government have ceased to declaim that the reins of the Spanish economy have been ceded to outside authorities. And yet, the unconditional adherence to the Merkel-Sarkozy plan (which includes a reform of the European treaties) probably would entail a capitulation to the directives of Berlin and Paris.

Note the fact that Chancellor Merkel presented her program for Europe to the Bundestag. The same should be the case in Spain. Rajoy and Zapatero's hearty embrace of the plan needs to be debated rapidly and imperatively in Congress. This debate needs to define precisely the extent of fiscal adjustment the Spanish economy can bear, while still having some margin to prevent a recession.

It could be argued that the urgency of the crisis justifies the dictates of France and Germany. But when the excuse of the crisis evaporates, the transfer of power from national governments, legitimized by the ballot box, to the French-German axis without any say in the process for the European Commission or parliament will become apparent. This is a deviant transfer of power to save the euro because it entails the implicit designation of the arbiter designated to oversee the stability of the currency.