The Square Mile: A breakdown of trust is Rajoy's biggest headache

Increased civil unrest is staring the Spanish Prime Minister in the face as he strives to introduce reforms aimed at resolving his country's economic crisis

An unspoken practice in Spain is that most workers get two salaries. One is the official salary, the taxable one, the other is cash in a brown envelope – the black market if you will. Many private-sector workers are paid in this two-tier manner.

Officials deny its existence, but I know it to be a common practice as friends and family who live in Spain tell me this is the case, and has been for decades. Ironically, the expression "Spanish practices" is a British one coined to criticise the unions in the 1970s and the 1980s for the way their members allegedly manipulated working hours.

Like the Greeks, the Spanish don't trust the political classes with their money, so avoid paying tax as much as they can. No wonder tax receipts have been falling. Reforming the system is part of the package of 43 new rules announced by Spain's Prime Minister, Mariano Rajoy, in the government's emergency Budget on Thursday, to make the country more competitive.

But Mr Rajoy knows he must be careful not to provoke a simmering public – which is why most of the ¤40bn (£31.8bn) package of austerity measures is aimed at slashing public spending rather than raising money through higher taxes. The anger goes deep, as we've seen from the scenes of policemen firing rubber bullets at protesters in Madrid last week, and the marches of more than a million Catalans calling for the right to self-determination.

Such is the fury at the proposed austerity measures that the Catalan regional prime minister, Artur Mas, has called for early elections on November 25 to launch a bid to allow the 7.6 million Catalan population to choose their future with a referendum. It's a devastating blow for Mr Rajoy as Catalonia has been the engine-house of growth in Spain but has also been badly hit by the crisis. Mr Mas has had to cut health, education and public sector salaries and applied for a regional financial rescue plan for €5bn from the Spanish state. More than half of the Catalans are said to want to become a sovereign state. They don't trust Madrid, let alone Brussels.

Mr Rajoy was meant to be the leader who could deliver the austerity necessary to secure a national bailout. That no longer looks certain as his government struggles to put through the latest package and Friday's bank stress tests showed ¤60bn is needed to recapitalise the banks and create a bad bank of toxic property loans.

He now wants to introduce these emergency measures in a bid to obtain an unconditional bailout from Brussels and help from the European Central Bank with its new bond-buying programme. But the surplus countries in the north – Germany, the Netherlands and Finland – may not let Mr Rajoy get away with this. They are not convinced the Spanish government will be able to push through its reforms, or that they will work. The new cuts will further shrink the economy, which means deficit reduction will be even harder to achieve. One in four people is unemployed. If that worsens, as it is bound to, unrest is set to spread further into rural Spain.

It's not just the less well-off who are troubled. Figures on Friday showed that Spanish investors took ¤331bn of capital overseas in the 13 months to the end of July – equal to a third of the output of the economy – although the rate slowed in August.

While Mr Rajoy still hopes to avoid requesting a bailout from the eurozone rescue funds, this now looks to many inevitable. What's the alternative? Spain exiting from the euro, and defaulting on its debts? That is the most probable outcome but almost secondary to the bigger task. Whatever is negotiated between Madrid and Brussels, the Spanish government has to regain the trust of its people before the social contract breaks down completely.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there