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18 Dec 2015
Spain: No punchy wage increase ahead of elections - ING
FXStreet (Delhi) – Geoffrey Minne, Economist at ING, suggests that this was not a good week for Mariano Rajoy, after being physically assaulted during a meeting on Wednesday, a sluggish 0.7% increase in wage in Q3 can be considered as disappointing only 3 days before Election Day.
Key Quotes
“In 3Q15, labour costs per worker increased by 0.3% YoY (0.4% if seasonally adjusted), mainly driven by an increase in the services sector (0.5% YoY). Labour costs both in industry and the construction sector appeared lower than last year (respectively, -0.4% and -0.3% YoY) and have been so since the beginning of the year. This should be welcomed by sectors aiming to enhance their international competitiveness.”
“In the context of imminent elections, this does not necessarily support parties favouring pro-market policies and in particular the incumbent PP. This data release could be interpreted as a piece of evidence of the reforms not benefiting worker revenue.”
“The two non-traditional parties seem to benefit from the weak spot of the two traditional parties and the last trend show an increasing popularity for both Ciudadanos and Podemos. The name of Alberto Rivera, the leader of Ciudadanos, was clear this week as Rajoy suggested a centre-right coalition and Sanchez a tripartite Anti-PP Coalition. Rivera’s prospect seems different as he refuses to be associated with anyone from “old Spanish politics”. He might therefore be tempted to form a multi-party government of specialists (among other the well-known professor of the LSE, Luis Garicano) with him as PM. Taking concrete steps in this direction would be difficult as the idea would not be strongly supported by the other political partners and a failure “à la Varoufákis” should be feared by many.”
“To be sure, Rajoy and the PP keep on leading most recent polls (25-28%) ahead of the socialist party (20-23%), Ciudadanos and Podemos (both 18-20%). The winners remain by and large undetermined, knowing that many potential coalitions are feasible and that a large part of voters are still undecided. One should finally note that voter share and number of seats in parliament do not perfectly match. Voters from large cities tend to be underrepresented in the national parliament.”
“All in all, political newcomers are set to achieve substantial benefits in terms of vote share but not that much in terms of parliamentary seats as cities with larger and younger population are underrepresented in the parliament. We still expect a PP-Ciudadanos coalition on condition of changes of some key leaders of the PP. This scenario should be positively welcomed on the financial markets and should maintain the spread between Spanish bonds and German or Italian bonds at low levels in the aftermath of the elections. We could not say the same if a tripartite Anti-PP Coalition was the outcome.”
Key Quotes
“In 3Q15, labour costs per worker increased by 0.3% YoY (0.4% if seasonally adjusted), mainly driven by an increase in the services sector (0.5% YoY). Labour costs both in industry and the construction sector appeared lower than last year (respectively, -0.4% and -0.3% YoY) and have been so since the beginning of the year. This should be welcomed by sectors aiming to enhance their international competitiveness.”
“In the context of imminent elections, this does not necessarily support parties favouring pro-market policies and in particular the incumbent PP. This data release could be interpreted as a piece of evidence of the reforms not benefiting worker revenue.”
“The two non-traditional parties seem to benefit from the weak spot of the two traditional parties and the last trend show an increasing popularity for both Ciudadanos and Podemos. The name of Alberto Rivera, the leader of Ciudadanos, was clear this week as Rajoy suggested a centre-right coalition and Sanchez a tripartite Anti-PP Coalition. Rivera’s prospect seems different as he refuses to be associated with anyone from “old Spanish politics”. He might therefore be tempted to form a multi-party government of specialists (among other the well-known professor of the LSE, Luis Garicano) with him as PM. Taking concrete steps in this direction would be difficult as the idea would not be strongly supported by the other political partners and a failure “à la Varoufákis” should be feared by many.”
“To be sure, Rajoy and the PP keep on leading most recent polls (25-28%) ahead of the socialist party (20-23%), Ciudadanos and Podemos (both 18-20%). The winners remain by and large undetermined, knowing that many potential coalitions are feasible and that a large part of voters are still undecided. One should finally note that voter share and number of seats in parliament do not perfectly match. Voters from large cities tend to be underrepresented in the national parliament.”
“All in all, political newcomers are set to achieve substantial benefits in terms of vote share but not that much in terms of parliamentary seats as cities with larger and younger population are underrepresented in the parliament. We still expect a PP-Ciudadanos coalition on condition of changes of some key leaders of the PP. This scenario should be positively welcomed on the financial markets and should maintain the spread between Spanish bonds and German or Italian bonds at low levels in the aftermath of the elections. We could not say the same if a tripartite Anti-PP Coalition was the outcome.”