Future Generator: Media sentiment towards Spain to turn negative through January

Future Generator: Media sentiment towards Spain to turn negative through January
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The ‘Future Generator’ is a highly unique and cutting-edge approach to forecasting ‘media sentiment’, developed by a partnership between Global Risk Insights (GRI) and Ethnographic Edge (EE). The aim of the forecast is to determine how media sentiment towards a country’s political environment might develop in the future. Considering the impact of media sentiment on trading and investments, our forecasts will give readers more time and context to maximize on market opportunities.
The following is a Future Generator assessment of Spain.

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Source: Ethnographic Edge

The EE signal suggests negative media sentiment towards Spain’s political climate

EE’s data analytics platform projects that media sentiment towards Spain will turn negative over the next three weeks. Considering the strong correlation between media sentiment and political events, EE concludes that the Spanish political environment will focus on negative news through the month of January and into early February.

GRI Assessment of the EE Signal

GRI’s team of directors and our Europe expert have assessed this signal provided by EE. Based on local expertise and political risk training, we agree with the data analytics produced that Spain will receive negative media coverage for the next three weeks. This is likely due to the following reasons:

  1. Increased focus on tension pertaining to Catalan demands for independence.  

Demands for Catalan independence are growing more insistent. Catalan leader Carles Puigdemont outlined the prospect of a planned independence referendum in September in his New Year’s address. This follows a similar poll in 2014, which showed overwhelming support in favour of independence.

The recently formed Spanish government headed by PM Mariano Rajoy has firmly denied the legitimacy of the Catalan independence referendum, deeming it unconstitutional. Meanwhile, civil disobedience is on the rise, with Catalan flags flying from city halls and several clashes between Catalan politicians and Spanish judiciary in recent months. In open defiance of Spain, the Catalan government insists that a 50% turnout voting in favour of independence is legitimate and will result in secession.

On a related note, the trial against Artur Mas, former leader of Catalonia, who organized the poll in 2014, is expected in early February. Media coverage in the run-up to the trial may add further fuel to the fire.

  1. Elevated unemployment rate at odds with 8% hike in minimum wage

The Spanish labour market is gradually improving, but the unemployment rate is still high. Analyst estimates put it just shy of 20% for Q4, roughly the same as in Q3. In December, the steepest increase in the minimum wage in 30 years was approved, meaning a jump from €764.4/month to €825.5/month on January 1st this year.

While the move was criticised by unions as insufficient, it may lead to stagnation or even reversal in the falling trend in unemployment. Those who are currently jobless – predominantly young people and the low-skilled – are also very likely to enter the labour market at the minimum wage. Raising it might leave them in a worse situation, and halt the progress in labour market indicators for Spain. In addition, a high minimum wage could encourage illegitimate hiring and thus erode the tax base. Since scores of unemployed have been outside the labour market for years, there is a dire need for retraining. However, this is costly and the budget shortfall was 4.6% in 2016. While Spain has pledged to reduce the deficit to 3.1% in 2017, it is still in excess of the 3% limit in the EU Stability and Growth Pact. The projection for this year appears rather ambitious.

Categories: Europe, Future Generator

About Author

Mikala Sorenson

Mikala Sorensen is an Economist with regional expertise in Europe. She holds a first class honours degree in Philosophy, Politics and Economics from the University of York and a Masters in Economics from the University of Copenhagen. Having interned at the Danish OECD-delegation in Paris and currently working at the Danish Ministry of Finance, she specialises in politics and macroeconomics. Analysis for GRI is an expression of her own views.