Lessons from Spain’s recovery after the euro crisis
Its admirable economic progress could be hobbled by politics
JUST six years ago Spain seemed to be the European Union’s biggest economic calamity, menacing the survival of the euro itself. As it goes on holiday this week, it is in much brighter shape. Thanks to structural reforms and some good fortune, it is enjoying a sustained recovery. Spanish politics has little of the xenophobia common elsewhere in Europe. Forty years after it became a democracy, on issues of personal liberty such as gay marriage Spain feels Scandinavian rather than southern European. Boasting the world’s second-highest life expectancy, a good health service and world-class transport infrastructure, it is in many ways a great place to live.
Yet that is not how many Spaniards see it. The slump in 2009-13 opened wounds that have yet to heal (see Special report). Spain is still more unequal, has more poor and more low-paid workers than in 2008. Real wages have fallen. Many younger Spaniards have had to delay their plans for a career, a house and children. Politics reflects that. A stable two-party system gave way in 2015 to hung parliaments, as public ire fuelled two newish parties: Podemos on the radical left and Ciudadanos, a centrist party a bit like the one running France.
Podemos is one sign that Spain has not wholly been spared populism. Another is that Catalan nationalism has mutated, largely because of the crisis, into intolerant separatism. Both, in different ways, challenge the broad consensus that underlay the democratic constitution of 1978.
Spain does not need refounding. But it does need further reform. That task falls to Pedro Sánchez, the new Socialist prime minister who came to power unexpectedly last month after ousting Mariano Rajoy with a censure motion over corruption scandals that were dogging the conservative People’s Party (PP). His first job is to keep the recovery going. Reducing the burden of public debt (98% of GDP) is vital if Spain is not to be caught out by the next downturn. Rather than repeal Mr Rajoy’s labour reform, as some Socialists want, Mr Sánchez should curb the abuse of temporary contracts. Education and skills-training need fixing; the welfare state should spend more on the young rather than raise unsustainable pensions.
The trickiest problem is Catalonia, with 7.5m people and a fifth of the Spanish economy. It has been split in two by the actions of its separatists, culminating in an unconstitutional referendum and a unilateral declaration of independence last autumn. That was bound to provoke a harsh reaction from the centre. Like most other European democracies, though not Britain, Spain has a written constitution that upholds national unity. Any referendum on independence risks being copied in other regions, potentially breaking up the country. International law, in effect, recognises no right to self-determination by a region in an advanced democracy. No serious European politician is willing to countenance this; Britain’s referendum on Scottish independence is unlikely to be copied elsewhere.
That said, in dealing with Catalonia and the grievances of a large minority of its people, Mr Rajoy never found a balance of firmness, understanding and proportionality. Spain’s judiciary, independent but often bovine, has made things worse. Charging Carles Puigdemont, the fugitive former Catalan president, and his colleagues with rebellion, under a law aimed at stopping military coups, was self-defeating. Predictably, a German court ruled that Mr Puigdemont could be extradited only on a lesser charge, prompting the Spanish court to desist. The best course would be to free the Catalan prisoners and charge them all with disobeying the constitution, punishable with lengthy disqualification from office.
Mr Sánchez’s instincts on Catalonia are better than Mr Rajoy’s. He has opened talks with Mr Puigdemont’s successor. He has suggested tweaking Catalonia’s statute of home rule and getting Catalans to vote on that. Spain anyway needs to review its system of decentralisation, recognising that a diverse country is best governed in the manner of federal Germany rather than, as is the PP’s instinct, centralised France. That requires politically difficult constitutional changes.
Catalans among the Puigdemont
Mr Sánchez says he wants to govern until 2020. With only 84 of the 350 seats in Congress, he would be wise to call an election sooner. Government has lost momentum since the PP lost its majority in 2015. Spain cannot afford two more years of doing nothing. In the Socialists and Ciudadanos it has the elements of a future reformist coalition. That matters: the best way to defeat separatists is to make Spain as a whole more effective and attractive. By contrast, gridlock in Madrid risks reinforcing the stand-off in Catalonia and wasting the chance to turn the economic recovery into a Spanish renaissance.
This article appeared in the Leaders section of the print edition under the headline "Spanish lessons"
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