Key Challenges

Active voice at
EU level
After having implemented structural reforms during the past five years, and having achieved a path of solid economic growth, the Spanish government indicated that it wanted to make its voice heard at the EU level. Here, it was taking advantage of the pro-European stance of Spanish public opinion, along with the leadership gap left by Brexit, and the euroskeptic governments in Italy and Poland. Prime Minister Sánchez participated proactively in the migration debate and supported French President Macron’s plan to strengthen the euro zone.
Government’s weak position limits options
Although the new socialist government seems to have very limited maneuvering room for policy reforms due to its parliamentary weakness, its initial measures and declared priorities all highlighted the main challenges at the domestic level.
Annual tax revenues
must be increased
On the fiscal front, the gap between new policy measures and tax receipts will oblige Spain to collect more revenues. The new government confirmed that it would increase annual tax collections from 38% to 42% of GDP; however, the tax system also needs to increase its efficiency and reduce the incidence of tax evasion.
Greater focus on innovation, education
In order to improve the economy’s competitiveness, the government must place greater emphasis on innovation and education. Although the unemployment and youth-unemployment rates have declined somewhat, the government must develop and implement job-creation policies.
Risk of rising
social tensions
Maintaining social cohesion has itself become a critical challenge. There is a near-term risk that spending cuts in education, inclusion and family policies may increase social tensions. The government has recognized the need to act in the social field, but budgetary constraints limit the scope afforded to active policymaking. The most visible challenge to the welfare system is the aging of the population, along with the pressure this is already exerting on the sustainability of the healthcare system and the viability of the pension system. Most social policies fall under the responsibilities of the autonomous regions. In this sense, the funding system for regional competences needs to be reformed so that the subnational governments have sufficient resources to address their responsibilities.
Energy transition
is critical
Spain’s geographical location strongly exposes it to global environmental challenges such as desertification and climate change. The recently created Ministry for the Ecological Transition aims to lead an energy transition toward more ecologically sound means of production.
Forming alliances necessary, but difficult
Regarding political stability, the single-party minority government will require allies for most legislative initiatives. This means the PSOE must strike compromises with other parties in the parliament on most issues. In today’s polarized political climate, this will be a significant challenge. Moreover, the situation in Catalonia endangers political stability. Although there have been signs of a better understanding, political positions remain very distant.

Party Polarization

Newly fragmented
party system
From the mid-1980s to the mid-2010s, Spain’s national party system was dominated by a simple competition between the social-democratic Spanish Socialist Workers Party (PSOE) and the conservative People’s Party (PP). The bipolar left-right competition led to a majoritarian and confrontational style of democracy, but as major parties tended to win an absolute parliamentary majority, polarization was no more than a minor obstacle with regard to policymaking. However, a number of factors (including economic crisis, corruption scandals, lack of popular trust in the two mainstream traditional parties and the secessionist conflict in Catalonia) have produced a newly fragmented and more polarized party system. Since 2014, the leftist anti-establishment Podemos party and the center-right Ciudadanos have entered the national arena, the moderate nationalist Catalan forces have collapsed, and an emergent right-wing populist party, Vox, has emerged with strength. Thus, the April/May 2019 elections resulted in a further fracturing of the political landscape.
More choice, but less government stability
While the wider choice of political alternatives for voters may be healthy, it has come at the cost of reformist momentum and government stability. Moreover, polarization has proved to be a significant obstacle to cross-party agreement and the formation of parliamentary majorities. Following parliament’s rejection of the state budget in February 2019, the minority Sánchez government collapsed and early general elections were called for April 2019. However, following the April 2019 elections, parliamentary support for a minority or coalition government could not be secured. Thus, further elections were called in September 2019, which are due to be held in November 2019. With polls predicting that no party or block will win enough support to form a governing majority and after four elections in only four years, Spaniards are facing the prospect of several further weeks or even months of tense coalition negotiations among parties split into increasingly antagonistic left-right blocks.
Polarization undermining policymaking
The increasing political polarization not only affects political conflict and the electoral arena, but may affect the capacity of the government to address an economic slowdown, high unemployment, precarious public finances, the Catalan crisis, maintenance of social cohesion and, in the long run, the stability of the democracy itself. Spain needs a certain stability and normal government. (Score: 4)
Dieter Nohlen, Mario Kölling (2020). Spanien: Wirtschaft – Gesellschaft – Politik. Wiesbaden: Springer.
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