Spain's Comeback King Writes EU Playbook for Populist Battle

(Bloomberg) -- Spanish prime minister Pedro Sanchez is making a career out of coming back from the dead.

Look at his track record. He was ejected as leader of the Socialists only to claw his way back into the job. He posted the party’s worst-ever election result -- twice -- only to go on to win a shock no-confidence vote and come to power last year with the smallest governing group in the country’s modern history.

Now, in an election he was forced to call after failing to pass his budget, the 47-year-old managed to contain a nationalist backlash against Catalan separatists to come within touching distance of a more lasting coalition.

Spain's Comeback King Writes EU Playbook for Populist Battle

If he can pull that off, it will bring a degree of calm to an economy that was battered by the financial crisis, riven by Catalonia’s dramatic push to become independent and destabilized by three elections in four years. Frustrated voters had turned away from the two traditional parties and different brands of populism had thrived in the vacuum.

As he get back to work on Monday morning, Sanchez still faces a struggle to pull together a majority and questions about what sort of legislation he’ll be able to pass and how long he’ll be able to govern. But the election result gives him a much broader range of options and with 123 lawmakers instead of 84, his personal authority has been bolstered.

What makes Spain an important test case is that it is a committed European Union member at a time when many in its cohort are flirting with euroskepticism and the U.K. is in the throes of a disruptive Brexit. Victory for Sanchez will reassure mainstream parties worried about their flagging appeal going into European Parliament elections at the end of May and offers clues into how to weather insurgents and regain the initiative.

Risk Taker

He had been in power scarcely seven months when Sanchez sensed that it was time to make a preemptive strike, according to two people familiar with his thinking. It was February, and he saw his two main rivals standing shoulder to shoulder with Spain’s new nationalist firebrand, Vox, in a calculated photo op that dangled the prospect of a trinity of parties on the right ruling the country.

Spain's Comeback King Writes EU Playbook for Populist Battle

He saw the danger but also sensed an opportunity. His efforts to pass a budget had floundered, the momentum seemed to have gone out of his minority government and critics were writing his political obituary all over again.

But Sanchez believed the People’s Party’s rookie leader Pablo Casado and Albert Rivera of the centrist Ciudadanos had made a fatal error by joining Santiago Abascal of Vox at a demonstration against the government’s policy of reconciliation with Catalonia.

Overexposure

First of all, Casado had gifted Abascal a status in the public eye he’d never before enjoyed. Beyond that, Sanchez sensed the degree of anti-Catalan sentiment being whipped up was overstated. The crowd looked impressive, filling Madrid’s central Plaza Colon and the surround streets, but the parties had bussed in support from across Spain.

So he accepted Casado’s demand for a snap election to let voters decide how the country should address the Catalan challenge. Sanchez is a formidable and photogenic campaigner who proved his worth back in 2017 when he drove himself from rally to rally to wrest back the leadership of his party.

Spain's Comeback King Writes EU Playbook for Populist Battle

Twelve weeks later after the Colon demonstration, Sanchez heads the biggest group in parliament. Casado lost half his lawmakers.

In the 350-strong chamber, Sanchez may need help from as many as half a dozen groups to govern and that effort is unlikely to be completed until parties have fought the European elections.

Groundwork

Looking back, few people gave the Socialist leader a chance when he called a no confidence vote against Prime Minister Mariano Rajoy last May. But he tilted the field in his favor by cutting a deal with the Basque Nationalists that forced Catalan separatist groups to fall into line with him.

Even then, most people saw a terminally weak government. Sanchez used his time in office to prepare the ground.

As a first move, he named a cabinet in which women outnumbered men for the first time in Spanish history. With one move he’d made headlines around the world and signaled to progressive voters what sort of government he could produce if they ever gave him a proper mandate.

A few days later he repeated the trick, intervening in an immigration row between France and Italy to offer harbor to a rescue ship.

His budget never looked like passing, but he plowed on with it nevertheless through the fall and winter of last year. As a result, his plans to ramp up spending and end the years of austerity were front pages news day after day.

Project Fear

Casado’s manifesto, when it came, didn’t get even a fraction of the coverage and his doom mongering over the economy struck a hollow note as Spain continues to outperform most of the rest of Europe.

Without a budget, Sanchez still had leeway to make some spending decisions and he used them to target voters on the left that the Socialists had lost to the anti-establishment group Podemos since the economic crisis.

He hiked the minimum wage, boosted unemployment benefits for older workers and started the biggest public hiring program in a decade. The time was ripe for Sanchez to reclaim territory from Podemos, whose support base has shrunk since the last election.

Key to Sanchez’s success has been his ability to paint himself as “a malleable socialist,” said Antonio Barroso, managing director for Europe at Teneo Intelligence in London.

It is that very adaptability that is the secret to his enduring ability to surprise.

©2019 Bloomberg L.P.