The gain in Spain,

The Economist, June 7, 2018.

Populists of left and right are on the rise in Europe. Despite its political turbulence, Spain is different.

Though only a few days old, June has been cruel to the European Union. In Italy, on June 1st, the first all-populist government was formed since the second world war. It brings together in bizarre conjunction the maverick left-wing Five Star Movement, a party founded nine years ago by a television comedian, and the hard-right nativists of the Northern League. Also on June 1st Mariano Rajoy, Spain’s prime minister, was dispatched in a confidence vote that has brought to power an even narrower minority government under Pedro Sánchez (pictured). His Socialists control only 24% of the lower house.

Not for the first time, Spain and Italy appear to shadow each other through economic and political tumult. Either or both governments may be short-lived. And nervous markets have pushed up the bond yields of both. But there the similarities end. Spain these days counts as a bright spot, unlike Italy, which has much to learn from its Iberian cousin.

Of the two southern European states, Spain had by far the worse financial crisis of 2008. Its property bubble burst, crippling the banks and causing mass unemployment that peaked at 26%. In 2012 Spain was bailed out by its European partners, in contrast to Italy which managed to hold on. Despite these problems or, more likely, because of them, Spain has had the better recovery. It reduced its budget deficit, cleaned up its banks and freed its labour market. Thanks to growth that has exceeded 3% a year since 2015, Spain’s output is now above its pre-crisis level. Italy, by contrast, has been slow to deal with the losses at its banks, and its labour-market reforms have been timid. Its recovery is among the weakest in the euro zone, and output still languishes below the pre-crisis peak.

Bust and boom.

The difference lies in political leadership. In many ways, Mr Rajoy has served his country well. Taking office in December 2011, in the teeth of the crisis, he administered tough medicine consistently. Until this month a remarkable political survivor, he had managed to hold on to power without a parliamentary majority for two and a half years.

He had his limitations. His pigheadedness meant that he could not stop the drama in Catalonia from turning into a crisis, culminating in a unilateral declaration of independence last October. That prompted direct rule from Madrid, lifted only now that the separatists, who won a regional election in December, have at last agreed on a new government. Above all, Mr Rajoy could never throw off the shadow of old corruption scandals in his People’s Party. A court verdict on some of these triggered the censure motion that destroyed him.

Yet he leaves Spain in better shape than Italy—not just economically but politically. Italy’s big problem is that the electorate has lost confidence in mainstream politics. Well over half the voters at the election in March chose parties from the political extremes. Italy has had no equivalent of France’s president, Emmanuel Macron, to reconstitute the splintered centre.

In Spain, too, established parties have suffered at the hands of insurgents. One new lot, Podemos, is anti-capitalist and left-wing (it wants to scrap the labour reforms, among other things), but it has struggled to reach 20% in polls. By contrast, the other newcomer, Ciudadanos, is broadly liberal and somewhat technocratic. It belongs to the centre and has become its country’s most popular party. Crucially, Spain has no significant movement on the nationalist right, unlike Italy, France and many others, including Poland and Hungary. Indeed, tolerance of refugees and migrants has been an impressive feature of Spanish democracy.

Difficulties lie ahead. Unemployment, and the debt stock, are still too high. The Catalan crisis continues to fester. But Mr Sánchez promises to maintain both the old government’s budget and, it seems, its labour reform. He also looks a better bet than the stubborn Mr Rajoy to explore political solutions in Catalonia. In due course, these may require new constitutional changes. Progress will not be easy, and Mr Sánchez may not get far before his weak parliamentary position derails him. But Spain’s politics look more stable than Italy’s, with its fading mainstream parties and the pantomime-horse of populists in government. Hard reform and economic recovery have prevented greater political instability. For that, at least, Spaniards owe muchas gracias to dour Mr Rajoy.
https://www.economist.com/leaders/2018/06/07/what-spain-owes-the-ejected-mariano-rajoy