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
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Wes Brown is sent-off
Italy celebrate scoring their second try
six nations
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower