Spain

   
 

Executive Summary

Long crisis has
transformed party
system
A long social and economic crisis (2008-2013), including several corruption scandals, has eroded the legitimacy of and public trust in Spain’s political system. This in sum has had a remarkable impact on the party system, particularly after the 2015 and 2016 elections. In addition to the two traditional forces, the conservative Popular Party (PP) and the Socialist Party (PSOE), the left-wing Podemos and the liberal Ciudadanos have emerged, and are now crucial for the formation of majorities in the parliament. Since a grand coalition between the two traditional parties is highly unlikely, the new parties are key as possible partners for (or for striking confidence and supply agreements with) minority governments.
More choice, but reform pace has slowed
A wider choice of political alternatives may be considered as a positive development, but its cost has been the loss of reformist momentum. In addition, the new far-right Vox party is also gaining popularity as a consequence of the Spanish nationalist wave that emerged in reaction to Catalonia’s secession bid in late 2017.
Government toppled
after corruption ruling
In May 2018, a high court found the PP government party guilty of having profited from an illegal kickbacks-for-contracts scheme. As a consequence of this conviction, the opposition entered a no-confidence vote against Prime Minister Mariano Rajoy, who was ousted and subsequently replaced as head of government by the socialist leader Pedro Sánchez. Since that time, the new government – drawing on the support of less than 25% of the deputies – has depended on support from Podemos, the Basque nationalists, and to some extent the Catalan secessionist parties. The new executive was skillfully presented in the media, effectively conveying a picture of political change, but it is obvious that it has little maneuvering room with which to implement deep policy changes.
New government too weak for big reforms
Given its very weak support in parliament, the new minority government renounced ambitious policy reforms, and instead focused on announcements and symbolic measures aimed at appealing to progressive voters in the run-up to new snap elections. In June 2018, Spain’s parliament approved the long-delayed annual budget for 2018; this had been drafted by the PP, but was later adopted by the PSOE, which lacked a majority with which to prepare an alternative budget. This underlined the instability of the new government. At the end of the period under review, its parliamentary weakness had become very visible and new elections were called for April 2019.
Catalan crisis
dominates debate
The Catalan crisis also dominated the political debate during 2018. The sharply divided regional parliament declared a rather symbolic independence in October 2017, thus leading the national Senate to activate Article 155 of the constitution. This suspended the operations of regional institutions, imposing direct national rule until fresh elections could produce a new regional government. After a tense electoral campaign – in which several candidates had been held in custody since November 2017, while others fled the country – the pro-Catalan independence parties won a new slim majority of parliamentary seats, without attaining a popular-vote majority (47.5%). On 2 June 2018, hardliner separatist Quim Torra took office as Catalan president; this was the same day that Prime Minister Sánchez was sworn into his new role. This reshuffled constellation of actors seemed to open a (small) window of opportunity for dialogue.
Tensions and trial make quick solutions unlikely
In fact, Sanchez tried to find political alternatives to manage the conflict respecting the Catalan statute and the constitution. However, the fierce opposition from PP and the Ciudadanos to this dialogue, significant conflicts among and within the pro-independence political parties, and the impending trial of the secessionist leaders have all increased tensions and make a solution very unlikely in the short term.
Economic growth
strong and balanced
In contrast to this turbulent political panorama, economic growth has been strong and balanced in 2018. The European Commission raised its 2018 GDP growth forecast for Spain from 2.5% to 2.6%. However, growth rates are expected to slow in 2019 (with 2.1% forecast), which is worrisome given the size of the country’s public debt burden. Other economic indicators show that competitiveness gains have continued to support exports. However, the contribution of net exports to growth is declining, and recovery has also been driven by domestic demand. Moreover, average incomes remain lower than before the crisis, and bank lending remains limited. Unemployment rates are still very high, at 15% of the labor force at the time of writing, with a forecast of 14% in 2019.
Pensions remain a
focus of debate
The future of pensions was another important issue on the political agenda during 2018. The effects of the crisis and increasing life expectancies have reopened the debate on the future of the social-security system. Spain’s social-security fund has shrunk from €66 billion at its peak to just €8 billion at the end of 2017. Although the new government announced a significant reform of the tax system in order to increase revenues, Spain continues to collect less in taxes relative to wealth than most other European countries, making ambitious education, welfare and environmental policies difficult.
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