• Telefonica's Alierta, a symbol of the establishment, retires
  • New party leaders have until May 2 to decide on end of Rajoy

As Cesar Alierta retires as chairman of former phone monopoly Telefonica SA, his departure marks another loss for an elite that traces its power to the dawn of democracy in Spain. 

The nation may still be in limbo after an inconclusive election in December, but gradually a fresh era is emerging with a new crop of political leaders targeting the most far-reaching changes since the death of dictator General Francisco Franco in 1975. Alierta personified the old guard, a coterie of friends in high places blamed by the new breed for excesses that made the country the most economically polarized in western Europe.

Cesar Alierta
Cesar Alierta
Photographer: Angel Navarrete/Bloomberg

“The old ways are coming to an end, and new ways are coming in,” Eduardo Serra, who served in governments of all stripes during the 1980s and 90s, said in an interview in Madrid. “Younger Spaniards deserve their chance.”

Alierta, 70, is among the generation of leaders who grew up as sons of privilege under the dictatorship and multiplied their wealth during the democracy with a style of business in which long-standing personal connections often trumped professional qualifications when it came to securing jobs and contracts.

Hanging On

Their figurehead, King Juan Carlos, 78, abdicated in 2014. Banking titan Emilio Botin died of a heart attack at 79 three months later and Rodrigo Rato, 67, the leading policy maker, is fighting a criminal probe relating to the collapse of Bankia SA under his leadership.

It leaves Mariano Rajoy, 61, who has rejected allegations in the National Court that he benefited from a secret party slush fund, clinging on as caretaker prime minister against the challenge of rivals almost half his age.

Podemos’s 37-year-old leader Pablo Iglesias rails against the privileges of the establishment that Alierta represents. Albert Rivera, 36, who leads the pro-market party Ciudadanos, is calling for a “second transition” to match the changes in Spanish society that followed the death of Franco.

While the new parties are still negotiating with the Socialists to try to form a governing alliance before a May 2 deadline triggers fresh elections, they are already reshaping Spanish life. This month, Rajoy pinched Rivera’s plan to switch Spain to the same time zone as the U.K. in line with its geographical location. Franco aligned Spanish time with Germany’s during World War II.

Second Transition

“The generation of the transition is now gone and the generation that began in the early 1980s like Rajoy is beginning to go,” said Alejandro Quiroga, a lecturer in Spanish history at Newcastle University in England. “It’s very difficult for Rajoy to present himself as a modernizer of any sort. They can pretend, but there’s nothing behind it.”

The son of a city mayor under the Franco regime, Alierta developed his career via political ties, running a state-licensed stock broker then the state-owned tobacco company before Telefonica. A devout Catholic who consulted the pope on his departure, he officially called time on his chairmanship on Friday. He remains on the board of Telefonica, whose share price has halved during his 16 years there.

He told a small group of Telefonica employees last week that he’s not comfortable with the changes in the political landscape and he can’t see himself engaging with the new wave of leaders, according to a person familiar with the conversation.

A Telefonica spokesman at the company’s headquarters in Madrid declined to comment. He said Alierta wasn’t available to comment for this story.

Insider Trading

Alierta’s generation saw Spain join the ranks of the wealthy developed nations, yet inequalities came with it and political institutions were corroded by graft as the youthful democracy struggled to rein in the excesses of the elite.

For his part, Alierta was embroiled in a scandal that emerged two years after he joined Telefonica in 2000.

A court ruled that he made more than $2 million from insider trading of shares in the tobacco producer he led, Tabacalera SA, in 1997 and 1998. He wasn’t convicted of any wrongdoing because the statute of limitations had elapsed by the time Madrid’s Supreme Court ruled on the case in 2009. He denied any involvement.

Rato, a former managing director of the International Monetary Fund, was the key figure behind Alierta’s appointment at Telefonica and maintained his support when the case emerged, according a person familiar with the episode.

Quid Pro Quo

As Rato was drawn into the criminal probe of Bankia SA’s near-collapse in 2012, Telefonica handed him an advisory role and a court in Madrid last month formally accused the phone company of making illegal payments to Rato. Banco Santander also gave Rato an advisory role at that time, though isn’t accused on any wrongdoing.

“There are all kinds of quid pro quos and favors," said Sebastian Balfour, emeritus professor of Spanish studies at the London School of Economics. “That’s the culture of nepotism in Spain.”

Alierta has been adept at responding to changes in the political landscape. After Rato’s People’s Party was defeated in 2004 by the Socialists, Alierta hired the new prime minister’s friend. When the PP returned to power in December 2011 under Rajoy, Alierta hired the deputy prime minister’s husband.

King Juan Carlos’s son-in-law, Inaki Urdangarin, was also on the books. Urdangarin is currently on trial for corruption in Mallorca. Alierta said that Urdangarin, who denies all charges, was a good employee.

Alierta’s successor, Jose-Maria Alvarez-Pallete, 52, has a more typical executive’s pedigree. He worked for international companies including Mexican cement maker Cemex SAB de CV before climbing the ladder at Telefonica.

When it comes to working the networks, Alvarez-Pallete’s “capacity isn’t the same because he doesn’t have the contacts,” said Jose Garcia Montalvo, an economics professor at Pompeu Fabra University in Barcelona. “He’ll also have more ability to resist impositions than Alierta might have had.”

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