As Spain Rushes Toward '92

...The Izquierda Unida (United Left) coalition, headed by the Communist Party, is in no better position to contend for the reins of power...

...The Catch-22 here is that if Spain is to improve its economy as a whole, it must overhaul and expand its neglected infrastructure and inefficient public services...

...The entrepreneur, previously regarded with scorn, has now been legitimized...

...In fact, the 47-year-old Prime Minister's awareness that his popularity rating might suffer in the process no doubt largely explains his dissolving Parliament seven months early and scheduling general elections for October 29...

...The fragmented conservative opposition has no leaders of Gonzalez' stature, nor does it have a well-articulated platform...

...The number of people working has gone up in recent months, but the jobless rate is still over 16 per cent —2,450,000 people are unemployed...

...For one thing, the discipline of fixed exchange rates obliges an ever increasing convergence of the country's fiscal policies with those of other member nations, especially West Germany...

...It would also mark the consolidation of the leadership role assumed by a new political class made up of people born after the Civil War who have been the standard-bearers of change...

...Nevertheless, the expectation is that with Felipe Gonzalez at the head of a third-term Socialist government, the country will continue moving toward the "Europeanization" that is a national obsession...

...Although the trade deficit worsened after Spain joined the European Community, and was aggravated as well by a strong increase in domestic demand, it was somewhat neutralized by advances in the service sector, particularly income from tourism...

...The Socialists' staying power can be explained in large measure by the absence of an appealing alternative...

...Meanwhile, exceptionally high unemployment persists...

...Indeed, the public sector has been shrunk by privatization at a pace that would make Great Britain's Prime Minister Margaret Thatcher proud...

...Lately, however, Spain's bright economic picture has begun to develop dark shadows...

...Briefly, during the general strike that paralyzed the country last December 14, it appeared that Gonzalez would pay a heavy political price for alienating labor...

...Noneofthis, of course, has done very much to increase employment or improve wages...

...Having been guided out of its economic crisis by a Leftist party using the fiscal tools of the Right, Spain now faces a secondphaseof adjustment, a'"cooling off" of theeconomy that is necessary to make it more competitive in an integrated Europe...

...Cuts in public funds, therefore, could provoke stronger criticism than the tax increases that seem likely—not least from the Union General de Trabajadores (UGT), which has broken off its century-old association with the Socialist Party...

...They did gradually distance themselves from Moscow, but until as late as 1985 the party was dominated by individuals who had been active during the Civil War...

...By the end of this year, for example, the balance of payments will show a deficit of approximately $11 billion, and the inflation rate will come dangerously close to 7 per cent...

...From the day Gonzalez won his first mandate at the polls in 1982, the Socialist strategy has been to do whatever it could to help the private sector fuel an economic recovery...

...In addition, as a step in bringing the burgeoning inflation down to EC levels the government will have to reduce public spending...

...The accomplishment of this task would represent the successful conclusion of what has been called a period of "economic transition...

...But the strike's impact on the Socialist Party's fortunes proved scant...

...It continues to receive the electoral support of a large part of the working class, but the Socialists' policies have not been primarily directed toward benefiting their once-natural allies...

...Thus the necessary adjustment of growing domestic demand to the realities of production will be virtually impossible to achieve through the continued exclusive application of a restrictive monetary policy that has led to a higher exchange rate for the peseta...

...What other country the size of Spain has four daily financial publications...

...What the opposition to Generalissimo Francisco Franco's dictatorship had not been able to organize throughout 40 years was occurring under the first Leftist government of the democratic era...

...The approaches open to Gonzalez in dealing with these troubles have been considerably limited by Spain's joining the European Monetary System...

...At the start of the final stretch on the road to '92, the Spanish people are again confronted by a paradoxical situation...

...This means the ruling Socialist Workers' Party— already the least doctrinaire Socialist party in Europe—will have to move even further away from its ideological home...

...The rush to prepare for '92 has thrown into sharp relief the problems and contradictions that unequal prosperity and a new political landscape have brought with them...

...Since the Franco dictatorship, when the Communists played a central opposition role, the party's share of the electorate has been for the most part symbolic...

...To adapt its economy to the conditions of a "Europe without frontiers, " Spain will have to correct imbalances that seem to have worsened during its recent economic surge...

...But many hard decisions remain to be taken...

...PRAGMATIC SOCIALISM As Spain Rushes Toward '92 BY EMILIO ONTIVEROS Madrid Since Spain's return to democracy 12 years ago, full integration with its northern neighbors has been a major goal—if not the primary motivation—of national modernization efforts...

...So it is not really surprising that when the historic opportunity to begin realizing this objective presented itself, Socialist Prime Minister Felipe Gonzalez seized the moment: Spain joined NATO shortly after the Socialists came to power in 1982, entered the European Community (EC) in 1986, and linked up with the European Monetary System last June...

...The result was an annual growth rate hovering around 5 per cent, accompanied by a reduction in normally low inflation levels compared with the Common Market average, plus unprecedented productive investment and corporate profits...

...The ruling party's pragmatism has had the effect, though, of altering the culture of a substantial segment of the Left in Spain...

...Contrary to what was anticipated, it won 39.5 per cent of the vote in June's balloting for the European Parliament...

...Foreign capital started streaming in, too, partly because a reduced risk factor made direct investment attractive, and even more because of high interest rates on financial assets held here in pesetas...

...Over the past three years the Spanish economy has followed a path of expansion clearly different from that of its European partners—stimulated by a favorable international climate, a supportive budget policy, and a rapid, albeit uneven, restructuring of principal business sectors...

...While the Socialists have occupied the respectable ideological space of European liberalism, the conservatives have confined themselves to mostly reiterating their same old anti-Socialist litany and are out of step with the present aspirations of the nation...

...Emilio Onttveros, professor of finance at Madrid's Autonomous University, is the director of International Financial Analysts, a Spanish research company...

...Many of them have become caught up in the feverish atmosphere of mergers, acquisitions and more or less hostile takeovers inspired by the magical year 1992...

...Now the country must meet the challenge of 1992, the year fixed by the European Council for the establishment of a single EC market...

...This will hardly be popular, given the limited options available in light of the new monetary restrictions...

...Its inability to capitalize on the social malaise that led to the December 14 crisis is only the latest indication of its weakness...

...A noteworthy reflection of all the entrepreneurial ferment is the heightened interest in economic news...

...The metamorphosis of the party is one of the supreme ironies of Spain's new political canvas...

...Individuals who not so long ago were listed in police files as subversives today have seats on the boards of the largest corporations and, more significantly, the most important banks...

...Unlike the Socialists, for a long time the Communists were unable to jettison their anachronistic ideological ballast...

...Consequently, Spain currently has at its disposal international reserves amounting to $46 billion, among the highest in the world...