Political Instability Puts Brakes On Spanish Growth

Roberto Garrido has watched with alarm as sales at his Madrid car dealership have plunged since January.

Purchases of Renault cars alone are down 30 percent in the past year, and his dealership has frozen all non-urgent investments, he said.

Spain, which holds its fourth general election in as many years on Sunday, is facing an economic slowdown as political instability at home stymies reforms and global uncertainty hurts business confidence.

When Spain returned to growth in 2013, the auto sector benefited from "a catch-up effect" as consumers who had postponed purchases during the crisis years re-opened their wallets, Garrido told AFP at his car dealership in the middle-class Fuente del Berro district.

But the effect is fading and the lack of a stable government in Spain has meant there are still no clear auto emission rules -- which is again putting off consumers, he said.

"Politicians have said everything and its opposite about diesel, petrol and pollution... As a result, people don't know what to do, what kind of car to buy and postpone buying one," Garrido said, hoping the outcome of Sunday's poll might provide more clarity.

Overall, Spanish car sales have fallen six percent in the first 10 months of this year, according to Spain's automobile manufacturers association, ANFAC.

In September, the Bank of Spain cut its growth estimate for 2019 to 2.0 percent from 2.4 percent previously.

That compares with an average annual growth rate of around 3.0 percent for the eurozone's fourth-biggest economy between 2015 and 2017.

Economists blame the slowdown on global uncertainty emanating from US President Donald Trump's trade wars with China and other countries, as well as weaker growth in Spain's main trading partners like Germany.

"We are seeing a substantial deterioration in household spending, as well as a significant slowdown in business investment," the head of macroeconomic analysis at BBVA Research, Rafael Domenech, told AFP.

Goods exports are already slowing and could be hit further by Washington's decision to slap tariffs on Spanish products such as olive oil, cheese and wine in a tit-for-tat row with the European Union over subsidies to planemaking giant Airbus.

Consumer spending picked up in the third quarter, but experts do not expect the improvement to last, with unemployment falling less rapidly than in recent years.

At the end of September, Spain's jobless rate was close to 14 percent, while in October, the country recorded its biggest monthly rise in the number of registered job seekers since 2012.

In the run-up to the election, acting Prime Minister Pedro Sanchez has remained upbeat, insisting on public radio Wednesday that the country had "solid fundamentals to face a slowdown".

He also pointed out that economic growth in Spain is still faster than the eurozone average and jobs continue to be created.

However, while polls suggest Sanchez's Socialists may win the most votes on Sunday, they won't secure a parliamentary majority. So an end to the political instability looks unlikely.

"Since 2012-2013, we have not carried out any structural reforms, the sources of growth are running out," said Toni Roldan, a specialist on economic policy at the Esade Business School.

"Of course, there has been a strong catch-up effect, but there has been no serious reform of education or of the labour market" where temporary contracts are more widespread than anywhere else in Europe, the expert said.

Furthermore, employers have sounded the alarm over the short-term economic impact in Catalonia of the violent protests that have swept the region in recent weeks.

The unrest broke out after Spain's Supreme Court on October 14 sentenced nine Catalan separatist leaders to lengthy jail terms over their role in a failed declaration of independence in 2017.

emi/ds/mg/spm/dl