Already shattered by the mishaps of Greece, Ireland and Portugal, the single currency could be in real danger of collapse if contagion extends to Spain. That is why the European Commission, the ECB, chancellor Merkel and president Sarkozy keep a keen eye on Spanish affairs, and keep pressing the recently elected government of Mariano Rajoy to pursue a very strict agenda of austerity and cuts. But recent developments in Spain could prove that’s it’s no easy undertaking.

It is Spain’s economic size that makes the possible effects of a Spanish default much more frightening than the above-mentioned cases. Spain is suffering the hangover of a real estate bubble triggered by deregulation and fuelled by cheap money, courtesy of the single currency. Now burst, it has left behind a mountain of private debt: businesses and households owe to Spanish banks and these in turn owe to their foreign (mostly French and German) colleagues, to the tune of well over 800 billion euros (£650 billion). Here lies the risk – a default could affect seriously these large lenders.

During 2009 there was a timid attempt to cope with the crisis by replacing dismal private investment with public expenditure. But as in many other countries – with the valiant exception of Iceland – the largest efforts were devoted to keeping the banks afloat, and there was not enough public money for both. By the end of the year the EU was back to stability as usual and austerity began.

In May 2009 came a 5 percent cut in public servants’ pay, the freezing of public pensions and reform of the labour laws. This triggered the first sign of resistance on September, a general strike called reluctantly by the large unions that was more a half-hearted blaze than a sustained fire, as their leadership feared an eventual Conservative takeover in the coming elections. In January 2011, these same leaders accepted a reform of the public pension system, selling it as the lesser evil. Consequently their credit sunk with Zapatero’s.

The radical left and the smaller more militant unions appeared too weak to pose any threat, and the Popular Party began to bank on victory in the general elections which were to take place by the end of 2011.

Previously, in May, local and regional elections had already resulted in a significant defeat of the Socialist Party as expected. But with this also came the unexpected: the eruption of the ‘indignados’, who stepped onto the stage during the electoral campaign.

Hundreds of thousands marched in the streets all over Spain and occupied public spaces, from tiny villages and working class neighbourhoods to the most centric squares in large cities. They aimed their criticism towards the banks, the markets and the EU, but also towards the political and electoral system, including the unions and the traditional left.

The movement itself was very pluralistic and undefined at the beginning. General criticism of the malfunction of formal democracy and rejection of neoliberal policies blended with naive apoliticism and the desire to behave ‘nicely’. The movement was radical enough to openly defy the electoral courts when they banned the demonstrations the day before the elections, but some controversial questions were left off the agenda, such as the war on Libya.

The movement had very little electoral impact in May – only an increase in blank and null votes and a proliferation of tiny groups which ran in the elections but got no significant results. But there was a sensible political effect: in August, after being summoned by Sarkozy, Merkel and the ECB, president Zapatero set out to amend the constitution to enshrine the absolute priority of debt repayments over any other commitment.

Socialist and Conservative leaderships supported the amendment and agreed to carry it out through an urgent procedure. They did not want to risk opening a public debate on the constitution two months after thousands of people had marched in the streets crying ‘there is no democracy when markets rule!’ The radical left and the unions strongly opposed the change. So did speakers from the ‘indignados’, and the topic started trending on the social networks.

In November, the Popular Party gained an absolute majority in the general elections. This was the result of a mass defection of Socialist voters – the Socialists’ vote fell by 4.3 million compared to 2008, while the Conservatives only grew by 600,000.

The United Left (a broad-based left coalition including, but not limited to, Communists) almost doubled its share and jumped from 2 to 11 seats, which could be read partly as fall-out from the ‘indignados’ movement.

The new government immediately launched a reinforced agenda of austerity and deregulation, which was warmly welcome by the powers-that-be in Europe: the ECB, Merkel and Sarkozy, and David Cameron by the way. Out of the need to comply with the deficit target came a new cut in public expenditure of 1.5 percent of GNP. Education, healthcare and social services run by conservative regional governments were also downsized, and some services which used to be free began to be charged for. Along with this came another reform of labour law which set out to destroy all the major achievements in labour relations, including collective bargaining and protection against arbitrary layoffs.

This was the last straw for the large unions, which until now had preferred bargaining over confrontation. A general strike was called for March 30, demanding the withdrawal of the labour reforms. It became a challenge to all the Popular Party’s policies, supported by all parties to the left of the Socialist Party, trade unions and all kinds of social movements including those connected to the ‘indignados’. The Socialist Party was caught in the middle, as it had been responsible for similar measures and also feared the strike would not succeed.

Meanwhile, regional elections were to take place five days before in Andalusia and Asturias, both of them traditional strongholds of the Socialists. Extrapolating from the results of the last elections the most probable outcome was another absolute majority for the Conservatives. President Rajoy strategically delayed the presentation of the national budget for 2012, which was expected to enclose harder cuts, to protect his party’s electoral prospects. He even engaged in a fake row with the European Commission over the deficit target for 2012, pleading for 5.8 per cent GNP against 4.4 per cent as initially planned. It was finally settled at 5.3 per cent.

The regional elections in Andalusia and Asturias were very disappointing for the Popular Party. Both ended in hung parliaments. In the case of Andalusia, which amounts to almost a fifth of Spain’s total population, the United Left and the Socialist Party won the majority of the seats, so a left-biased regional government is expected in this significant region. It will be added to Catalonia and the Basque Country, neither of which have got Popular Party government. It appears that the Rajoy’s hard measures have began to take their toll less than three months since he gained office.

Five days later, the general strike turned out to be very successful, especially among industrial, transportation, construction and, in general, blue collar workers who massively followed the call, not withstanding the years of passivity. The same cannot be said of public servants, where the number of strikers was less significant. Nevertheless the country was almost paralysed.

As is usual in Spain the strike ended in marches, attended this time by hundreds of thousands all over the country. Rank-and-file trade unionists marched alongside thousands of young people who had taken part in the ‘indignados’ movement, in a spirit of unity. Activists who had been trying to bridge the movements, with little success until then, were delighted. In some senses the elections had proved that the Popular Party is not invincible, and the resistance had taken confidence from this.

The unions have committed to further mobilisations if the government doesn’t move. The government has answered by drafting a extremely restrictive budget and announcing further cuts in health and education, plus new laws restricting civil rights. Mainstream economists admit that, with this budget, recession is almost unavoidable and unemployment will continue escalating.

The risk premium placed on Spanish sovereign debt is at it maximum, the financial system is in high distress and rumours of intervention by the EU are spreading. Recent developments have raised the stakes.

Will the resistance movement change the course of events? It is an open question now, but at least there is hope that we are not doomed. Some external developments could help too – for example, the results of the French presidential election and the coming Greek elections could open a new gap in the EU’s walls. But much will depend on the ability to strengthen the new unity that can be built in Spain. This is up to the unions, to the ‘indignados’ movement, and to the political left.

‘We, the unemployed, the underpaid, the subcontracted, the precarious, the young … demand a change towards a future with dignity. We are fed up of reforms, of being laid off, of the banks which have caused the crisis hardening our mortgages or taking away our houses, of laws limiting our freedom in the interest of the powerful. We blame the political and economic powers of our sad situation and we call for a turn.’

When a new and unknown platform called Real Democracy Now called for a demonstration last Sunday, 15 May, few expected that something like 130,000 people would turn out across Spain. Around 1,000 of those attempted to occupy Madrid’s central square, the Puerta del Sol, overnight in a conscious imitation of Tahrir Square. They were violently evicted by police, but the next day similar camps sprang up in most major cities. They are still mostly there and intend to remain until Sunday’s local elections.

Of course, though the movement has taken even the organisers by surprise, it has antecedents and a context. Its roots include those groups and movements connected to the World Social Forum process as well as the protests organised by young people before the financial crisis over the high cost of homes as a result of the property boom. More recently, a ‘Youth without a future’ demonstration attracted up to 3,000 people in April, marching under the slogan ‘No House, No Job, No Pension, No Fear’. This was not a particularly impressive turnout, though it matched the unimpressive turnout for recent trade union mobilisations.

The trade union response to the crisis was slow in coming and quickly lost steam. A general strike last September happened nine months after the first austerity measures were announced. Then the large unions signed an agreement with the government on pension cuts in January. Although they were denounced by smaller, more militant unions, those unions were unable to call a significant mobilisation against the agreement. Union rank and file members are showing clear signs of demoralisation.

Then came the election campaign. A court battle concerning the possibility of pro-ETA candidates running in the Basque Country resulted in them being allowed to run (good news because it signals a better chance of bringing terrorism to an end) but provided the right with an opportunity to stoke Spanish nationalistic chauvinism. On the other hand the austerity policies and the high rate of unemployment have alienated a lot of the popular classes who would normally support the PSOE. As a result the polls were forecasting a landslide defeat of the PSOE to the PP. United Left (IU) is showing significant advances in the polls, but nothing to match the major shift away from the PSOE.

Then the marches last Sunday erupted. They were called mostly by word of mouth and through social networks. Thousands marched against the banks and for real democracy. Botín, CEO of Banco Santander, and other prominent businessmen were identified as responsible for the crisis, while one of the most popular slogans was ‘PSOE and PP are the same shit’. Corruption is also targeted. People shouted ‘no hay pan para tanto chorizo’ (there is not enough bread for so many sausages). As well as being a Spanish sandwich sausage, ‘chorizo’ also means ‘crook’ in popular slang.

Some are now advocating a ‘blank’ vote in the elections, but in most cases ‘real democracy’ is understood as the need to reform the electoral regulations and, more significantly, the primacy of elected bodies over the ‘markets’ and the accountability of elected officials.

The right will still most probably win the elections although a surprise cannot be ruled out. If the defeat is large enough, PSOE prime minister Rodrigo Zapatero will probably be forced to call an early general election. It does not seem realistic to expect a left turn as his government is highly committed to the austerity policies that are being designed at the European level.

But the Spanish landscape the day after could be different. There could be new actors on the stage. Whether or not this particular movement survives, contestation in Spain is gathering momentum and it will recover. And although this new impetus will not automatically shift either the unions or the PSOE grassroots to the left, this week’s mobilisations will certainly have an effect on the labour movement. The anti-globalisation movement in Spain, which was thought dead, has reappeared under a new incarnation.

The formal reason for the strike is the Labour Regulation Reform Act, just passed by the government. In short the reforms make firing easier and cheaper and allow employers to ignore the agreements met through collective bargaining. The unions also reject the government’s austerity policies and the announced reforms in the public pension system.

But since these measures were adopted in June why did the unions wait for so long before calling the general strike?

Previously, in May, the government had decided a five per cent cut in public workers salaries and a freeze in public pensions, as a ‘signal’ to the markets’, which had been making runs on Spanish sovereign debt since the beginning of the year, after bringing Greece to the brink of bankruptcy. The answer of the unions was quite dismal. They called a strike in the public sector, which was very poorly prepared. They waited until the decree was passed instead of calling it in advance. They even managed to keep public transport workers out of the strike, apparently because the cuts were not immediately directed to them as their pay-roll is not in the public budget – even though it was obvious that the cuts in the subsidies to public transport would be sooner or later translated into lower salaries, as it happened a month later.

Thus they laid all the weight of the strike on office workers, nurses, doctors and teachers. It was a failure as everybody suspected. Firstly because the strike was called after the cuts were already in place so the strikers could only expect a double cut. Secondly, because the less combative sectors were left alone to carry on with the strike. And to make things worse, public workers had been under attack for weeks in the media, on the grounds that they were a privileged group enjoying lifelong contracts as opposed to precariousness and unemployment in the private sector. Nevertheless, thousands of people went on strike on 8 June and marched in the streets, chanting ‘what we need is a general strike!’.

And it came at last. Arguing the need to prepare it well and converge with the European wide mobilisation called by the European Trade Union Confederation (ETUC) – which turned out to be just a respectable but not that crucial march in Brussels – the strike was called for 29 September.

Lead up

By the end of August, the unions’ leadership began a frantic tour of Spain, attending assemblies and meetings heating up for ‘D-day’. The stakes were high. Mainstream media launched a campaign to discredit the strike. Polls were published forecasting a great failure. All sort of experts and well-intentioned but sensible ‘progressives’ advised against it: ‘you are right but we cannot afford it with the crisis’. Conservatives raised the tone by directly attacking the unions, who, it seemed to them, were ‘outdated’, ‘lived on subsidies’ and even ‘antipatriotic’. Employers discovered the ‘right to work’ one day. Pity they did not do so before with the five million unemployed whose right to work the other 364 remains undiscovered. Government showed themselves as sympathetic and patronising: ‘we respect the right to strike but they are mistaken’. ‘We know it is hard but all these measures we have adopted are for the sake of our children’s future’.

The campaign was so crude that it produced two very relevant and unexpected results. On one hand, the more moderate unionists grew radical to unprecedented extremes. On the other many leftist veterans, previously angry with the unions for their lack of muscle and quite disaffected, decided to strike. Hardliners and ‘softies’, who a couple of months ago did not even look at each other, sat at the same table in meetings campaigning for the strike.

Even though it was not the first intention of the union’s leadership, the strike became more and more political. A meeting with thousands of delegates in Madrid two weeks before the strike ‘reclaimed’ the resignation of Zapatero -causing immediate media headlines. The President was publicly annoyed. He travelled to New York and met the Wall Street Journal and a group of ‘investors’ to reassure them that he would not falter. The Minister of Labour announced he would resign in October to run the regional elections in Catalonia. The President of the Employers’ Confederation, a nice citizen who has fired 3,000 workers only this year, shut down an airline and a former public travel agency – and who is currently prosecuted for fraud – asked for police protection against the expected violence of the pickets.

Spain grinds to a halt

On the 29 September, at daybreak, Spanish cities looked as if it were Sunday. Public transport, limited to what is called ‘minimum services’, was almost empty. Later, many shops and banks opened their doors as well as hospitals and some schools. But there was neither fresh bread, fish or vegetables. Central Markets were closed. And most factories closed all activities except for maintenance tasks. Although it is very difficult to be precise in the scope of the strike, because there are many contradictory figures, facts are known. For example, electric power consumption, which can be checked on line, was well below an ordinary day. In fact it was below the figures in the previous 2002 general strike.

Major incidents were caused by the police intervention. At the gates of some factories, they harassed the pickets. In Getafe, an industrial town in Madrid region, they even fired some shots, but no one was injured. At the doors of Madrid City Hall, they charged against groups of militants, who were trying to block access. In Seville, at the university, a group of police officers on motorbikes got into the yards and clubbed some students on the run. Only in Barcelona there was some noticeable violence by the supporters of the strike, when the police evicted a group of anarchists who were occupying a bank’s building; which was abandoned, by the way.

Largest mass demonstation since Iraq war

A war of figures broke out in the media, particularly on radio stations. In the morning, ‘magazines’ conducted by star commentators – who, of course were not striking – and the probably over-optimistic figures given by the unions were denied by ‘real-life’ street reporters and speakers from the employers and the government. As the conductors endorsed this view, the stations were flooded with angry calls from workers and militants. A highly political debate with the audience surfaced. The government was quite cautious and spoke about an ‘uneven’ result. Only the employers insisted in pretending that the only people striking were those whose ‘right to work’ had been interfered with by the pickets. The Popular Party and other conservatives (Catalan and Basque Nationalists) expressed the somewhat contradictory idea that the strike was a failure of the unions and the government.

In the evening 1.5 million people marched through the streets all over Spain. 500,000 in Madrid, 400,000 in Barcelona, 50,000 in Seville and more …

Whatever the assessment one can make of the impact of the strike, the truth is that this has been the largest mass demonstration since the big marches against the Iraq war, which ultimately brought Zapatero in office. Thus the final act has shown that this strike has been a success thanks to dignity and class-consciousness, despite all the factors conspiring against it. People were aware; you could read it in their faces.

What now?

The unions are asking government to change the Labour reforms. President Zapatero says he cannot but he offers instead dialogue to implement a new reform, now in the public pensions system. The inention is to raise the age of retirement and to extend the calculation period for the accrued amount of the pension. Unions have already rejected this. Besides, the draft of next year’s budget has already been sent to parliament. It delves into the austerity plans required by the EU. The unions have also shown their disagreement. Will they stand firm? Hopefully, yes. The pressure from the grassroots has forced them to call this strike. It is not easy to falter now. But some more stamina is needed.

The strike has been useful to bring together radicals and moderates. Will this unity survive? Maybe. It is a matter of generosity for the large unions and intelligence on the side of the more radical but smaller ones. But some other problems have arisen. For example, the strike in the Basque Country was not as strong as desirable. Nationalist unions did not follow it. One of them – ELA- is too close to the conservative Basque Nationalist Party (PNV)- to expect anything from them, considering that the PNV supported the reforms. But the other one, LAB, is supposed to be leftwing. The problem lies in the schizophrenic nationalism cum socialism blend that contaminates the scale of priorities of the radical Basque Nationalists.

One of the most difficult questions is the lack of reflection on the new situation in the political scene. Until now, there was panic at the possibility that if Zapatero loses the next elections, the Popular Party will take office. The Socialist Party knew it and played this card. Now it is clearer to the unions’ leadership that this trap should be avoided. There is little to expect from Zapatero unless there is strength enough to make him change or otherwise a new political situation is created.

Calls for the resignation of Zapatero could also be heard on the marches. He may seem to dismiss the possibility of any political effect but he is worried. And he is not the only one, the political right may pretend to believe that the left is defeated, but the CEO of Banco Pastor, a medium sized bank, who was obviously against the strike and who fully endorses the reforms said the day after the strike on Radio Nacional that ‘we should be aware that the strike indicates a very serious social unrest’.

The logic of events points to another strike in a few months, now on the pensions issue. In the meantime left militants, groups and parties should try to nurture this new situation and keep pressure on the unions’ leadership. But also extend awareness to other sectors of Spanish society, who have remained reluctant or even indifferent. If this is done, next time will be better. Subjective conditions have changed already. Now there is a possibility to change the objective ones.