INTERNATIONAL POLICY ANALYSIS Austerity Policy in Europe: Spain Lothar Witte August 2012 n To date, the austerity policy initiated by the Socialist Party in May 2010 and intensi­fied since the beginning of 2012 under Rajoy’s conservative government has con­centrated on spending cuts in the public sector with clear negative effects for public employees. Up to now the social security system has been less affected. n The structural reform of the labour market has strengthened the position of employ­ers, made redundancies easier and weakened the negotiating power of the trade unions. n A further contraction of the Spanish economy is expected in 2012 and 2013. Un­employment will remain at the very high level of 25 percent, social inequality will increase, and progress in the restructuring of public finances will be slow. n The political situation will remain stable for the time being. The conservative Partido Popular dominates political events and there are no elections scheduled for the next three years. The growing dissatisfaction requires a socio-political player capable of channelling the isolated protest actions.