Marcus Walsh-Führing / Apr 2019
Pedro Sánchez, prime minister of Spain. Photo: Shutterstock
On April 28 the Spanish Prime Minister Pedro Sánchez will be running in Spain’s general election on a political platform that supports Franco-German calls to strengthen industrial policy in Europe as a response to weakening competition rules. While stronger competition rules are fundamental for the European Union to generate sustainable economic growth, the monitoring of industry depends on the ability to tax regulated industry.
The Prime Minister’s agenda is to create an eight-point roadmap that supports further development of the EU banking union, consolidation of the fiscal pillar of the euro, establishment of a proposed European deposit insurance scheme and the Eurozone budget, to name a few. The strengthening of the EU monetary and fiscal union through a stronger integrated institutional framework is a step in the right direction. At the same time, it does not provide member states in the EU the legal capacity to hold industry accountable in the Single Market.
Historically in Europe, the legitimizing force in regulation has been to expand the legal capacity to tax industry on the national level. In leveraging the eight-point roadmap, Sánchez’s political actions are the determinants for providing regulatory outcomes in industrial policy. So far, the Prime Minister has made comments in favor of rethinking the EU Commission’s decision on mergers and acquisitions, and he is reluctant to give the EU Council special power to override decisions made by the EU Commission. The ability of the eight-point roadmap to become a meaningful legislative framework for Europe and Spain will be dependent on the cooperation by member states in advancing the capacity of the EU to hold industry and international companies accountable in the Single Market.
To deliver on his eight-point roadmap, Sánchez must push for an EU-wide tax structure to provide accountability and legitimacy for member states to engage with industry. Such tax structure creates greater legal capacity for member states to regulate industry by developing legislative precedent. The taxes and fines that would be collected as a result of these reforms would provide the capital to implement Sánchez’s political agenda. Sánchez’s agenda to stimulate a political discourse on holding industry accountable in Spain could generate political support from undecided voters and citizens that have been left behind by globalization. This would provide the opportunity for offsetting the economic and political factors that have been blocking reform.
As reported by the Spanish newspaper EL PAÍS on March 16 the Governor of the Spanish Central Bank Pablo Hernández de Cos expressed his concern, “…. that the political uncertainty may end up slowing decision-making on issues of political economy that we are all aware need to be taken: preparing public finances for the next recession, reducing public debt and passing necessary structural reforms.” To create equity and equality in the marketplace, the Prime Minister must focus on sensible reforms by addressing taxation in debates on industrial policy to help with the reduction of public debt. This could also provide the capital for reinvestment in the economy and would, thereby, address the structural reform necessary to stabilize the economy.
Parliamentary fragmentation threatens reform and fiscal consolidation needed to maintain economic growth projections. Even if the Spanish economic models are not at risk of a recession in the Eurozone, there are determinant factors, such as Brexit and foreign trade, which have the ability to push the economy downward. The expansion of the eight-point roadmap to focus on strengthening EU legislation and to address industry policy would bring regulatory reassurance to the marketplace.
For Sánchez to win the election in April, he needs to address the necessity of building a governing coalition to avoid a looming economic recession. This is not an easy task to tackle in the current political climate. If he is able to overcome the odds, his reform agenda would position Spain in the centre of the political discussion on the direction of European integration.
This eight-point plan provides the opportunity to enact meaningful EU regulation that will strengthen accountability in the Single Market. Currently Sánchez is leading in the polls but he is facing opposition from the conservative People’s Party which is challenging his pro-EU message. The success of the eight-point plan is dependent on the Prime Minister’s ability to sell his vision of a more integrated Europe to the Spanish citizens. Europe is in the midst of possibly enacting meaningful industrial reform that would protect industry and competition by expanding regulation. The question is, if Sánchez wins the elections, will the EU embrace the call for more integration of the Single Market and will reforms go far enough?