X22 Report Spotlight

X22 Report News Flash

US Debt

national debt

X22 Report

Spain Votes In “Watershed” Election As Three Decade “Duopoly” Falls: Full Election Preview

Spain heads to the polls on Sunday in a historic election that may well spell the end of two-party dominance in a country racked by high unemployment and beset with corruption scandals. 

The election is a four-way race between the Socialists, Podemos, Ciudadanos, and PM Mariano Rajoy’s Popular Party. “With no party expecting a majority of parliament’s 350 seats, Spain appears headed for a minority or coalition government,” WSJ notes, adding that “wheeling and dealing among political leaders in search of a winning alliance will likely start almost as soon as the polls close and could last for days or weeks.”

Like October’s elections in Portugal, the vote will serve as a kind of referendum of Spain’s adoption of austerity and a slavish adherence to Berlin-style fiscal rectitude. Brussels has held up Spain and Portugal as examples of how bailouts, when paired with harsh fiscal adjustments, can work to right the proverbial ship, but the numbers tell a different story. Austerity looks more like “fauxterity” when one looks at the trajectory of the periphery’s debt-to-GDP ratios (see below) and as we’ve noted on any number of occasions (see here for instance), Spain’s economic “recovery” is anything but. 

Clearly, Brussels does not want to see another outcome like that which unfolded in Portugal where the Socialists aligned with the Communists and the Left Bloc to overthrow the Passos Coelho government early last month. New PM Antonio Costa has pledged to honor Lisbon’s obligations but as we explained, the new government in Portugal will almost certainly be less amenable to further fiscal retrenchment than its predecessor and that’s bad news for Brussels. 

As for Spain, the rise of Podemos shows that like their Portuguese counterparts, Spanish voters have become fed up with austerity policies that many everyday Spaniards believe have done more harm than good. “Spain emerged from a biting recession in mid-2013 and is growing at around 3% this year, the fastest rate among major eurozone economies, but the country is still coping with an unemployment rate of more than 20%, only slightly below the level when Mr. Rajoy took office four years ago,” WSJ writes. 

[embedded content]

“The outcome is the most uncertain in the 40 years since the end of the Franco dictatorship and the return of democracy,” Reuters adds, before noting that “about one in three of the 36.5 million eligible voters were still undecided going into Sunday. 

“Podemos’s ponytailed 37-year old leader, Pablo Iglesias, is considered too radical to serve as prime minister by most of the Spanish establishment,” Lluis Orriols, a political scientist at Madrid’s Carlos III University told The Journal. The media has long equated Iglesias with Alexis Tsipras.

Podemos is the most vocal critic of the austerity policies that WSJ correctly notes “have made Mr. Rajoy’s government a favorite of European leaders in Brussels and Berlin.”