Spain’s Crisis Is Desperate But Not Serious

(Bloomberg Opinion) -- Say what you will about Mariano Rajoy, forced to resign on Friday after seven tumultuous years as prime minister, but it’s in large part thanks to him that the country’s political crisis is not really a crisis for anyone but Spanish politicians, and in particular not for the European Union.

Rajoy, who lost a vote of confidence in the Spanish parliament on Friday, has often been accused of unconstructive stubbornness and passivity in the face of challenges to the country, his party and himself personally. These formidable challenges have included the Catalan secession drive, which Rajoy pushed back without compromise (but also without lasting success), and the recent devastating judgments in a case that revealed a vast kickback scheme within Rajoy’s Popular Party. Rajoy tried to play down the corruption case even as Pedro Sanchez, leader of the Socialist Party, rallied support for the no-confidence vote on Thursday. When the Basque nationalists, whose five votes in the fragmented parliament gave Sanchez the majority he needed, declared their position, Rajoy wasn’t even in the hall: He spent eight hours in a Madrid restaurant instead.

At first sight, he leaves behind a mess. The Catalans are as determined as ever to win independence, and the region has perhaps its most radical government ever. The traditional party system, in which the Popular Party has squared off against the Socialists for more than 30 years, is in tatters. Two young parties formed to challenge the corrupt political establishment – the center-right Ciudadanos and left-wing Podemos – lead the nationwide polls. Sanchez will have trouble running the country as prime minister for long because his coalition with Podemos and small nationalist parties is patently only a temporary, anti-Rajoy one. 

Oddly, however, none of this really matters for Spain’s ability to continue its recovery from the crisis that hit it hard at the beginning of the decade. The Rajoy era ends with the country’s economy on track to grow 2.7 percent this year, according to Bloomberg’s consensus forecast, after two years of more than 3 percent growth. Unemployment is still at a dismal 17 percent, but that compares favorably with the peak of more than 26 percent in 2013. The fiscal deficit is at 2.5 percent of economic output this year after peaking out at 10.5 percent in 2012. As head of a weak minority government, Rajoy managed to negotiate a budget that Sanchez wants to keep if he wins power.

Politically, too, there isn’t much to worry about. The Catalan crisis may be a constant nuisance, but real secession is not on the cards while half of Catalonia’s population doesn’t want it and the separatists are determined to avoid violence. As for the two-party system’s collapse, Rajoy has effectively served as a midwife for a new responsible and skillful political elite without the corrupt baggage the Socialists, to a large extent, share with the Popular Party.

The rise of Ciudadanos and Podemos in the midst of the crisis (the former became a national force in 2013, the latter was founded in 2014) once promised traumatic shifts like the one under way in Italy today. The two parties came out of what political scientist Aristide Zolberg would have termed a “moment of madness,” a political moment when “all is possible.” Podemos especially came from a culture of uncompromising anti-capitalist protest, with an economic program that originally included a universal basic income without any concern for its costs and a “citizens’ audit” of Spain’s national debt leading potentially to default. As the party matured, however, these demands were dropped and its program, still determinedly leftist, is already compatible with the mainstream. As for Ciudadanos, despite its leaders’ insistence that it’s neither left nor right, it’s a perfectly mainstream political force whose center-right instincts have drawn voters away from the Popular Party more than from the Socialists.

While Rajoy sat at the top of the old crumbling hierarchy, a new political elite coalesced around sane, workable ideas. It wants change, renewal, a cleaner government, perhaps a more generous social policy, but even those parts of it that wanted to blow things up are no longer eager to do it. Podemos leader Pablo Iglesias recently bought a 600,000 euro ($700,000) house with a swimming pool; this triggered a confidence vote in his party, and Iglesias survived it with 68.4 percent of the vote.

Both young parties are potentially ready to take part in coalitions. In a series of inconclusive elections held in the Rajoy era and the political maneuvering that followed them, they acquired the experience of national-level negotiations and a sense of how the country is governed. No matter what political combinations emerge from an early election, if that’s what’s in store for Spain, there is by now little danger that the country will adopt any disastrous economic policies. Unlike elsewhere in Europe, xenophobic forces have gained no traction and the various competing nationalisms in Spain are internally focused. Spexit isn’t really a word.

Spain’s crises look, feel and are manageable. No one will thank Rajoy for that, and his motivations throughout his time in government may have been as selfish as they were patriotic. Credit is due to him, anyway.

©2018 Bloomberg L.P.