On June 26th, Spanish citizens went to the polls to elect a new government. Again. They did so previously on December 20, 2015. Alas, those elections did not produce a clear victor with a majority of the vote as the results were too splintered for any two parties to form a governing coalition. Since then, a caretaker government has run state affairs. Despite the recent election, it seems this outcome will endure for the foreseeable future, given this election proved nearly as inconclusive as the last.
Partido Popular (PP), the governing conservative party, received a plurality, but despite a recently growing economy, PP was too tainted by corruption scandals to carry more than a third of the vote. Much of PP’s traditional bloc was siphoned off by Ciudadanos, an upstart center-right party led by Albert Rivera, an enterprising young Catalan politician who emphasizes Spanish unity in the face of Catalan and Basque separatism. In addition, Ciudadanos has yet to be tainted by accusations of endemic corruption.
The rest of the vote was divided between two leftward leaning parties: PSOE, the longstanding socialist opposition party, and Podemos, a parvenu leftist party led by political science university professors.
PP and Ciudadanos want to form a coalition government, but together they represent less than fifty percent of the votes cast on June 26th, and are seven deputies short of the requisite majority needed in parliament. Until these two parties can define where they will make up the difference, Spanish politics is at a standstill. If PSOE or Podemos decide to abstain rather than vote to reject such a coalition, a new government will be swiftly inaugurated. Yet, PP inspires such a degree of contempt among its rival parties that, while not impossible to imagine, such an outcome is difficult to fathom.
The time immediately preceding the 2008 financial crisis was the apotheosis of Spanish societal and political unity. Spain had never been more prosperous. While perhaps lacking the geopolitical influence of its “Golden Century,” spanning from the mid-16th century to the mid-17th century, living standards had never been higher. The Civil War was in the past. The Franco dictatorship was over. The transition to democracy in the 1970s was successful, and the king and prime minister averted a military coup in 1981. Almost without interruption, as there was a recession in the early 1990s, the economy had been on the rise. Spain’s nominal GDP was on track to surpass Italy’s as the third largest in the Eurozone. The economy was showing signs of distress, but all talk of a recession was repudiated by the term du jour: economic deceleration. The Ibex 35 (Spain’s equivalent of the Dow) remained at an all-time high. The Basque separatist terrorist organization ETA was less lethal than it had been in decades. Catalan separatism was kept at bay. Spain’s modern socialist prime minister, Jose Luis Rodriguez Zapatero, had graced the cover of Time and Newsweek (a rare feat for a Spanish politician) and had been described as “Spain’s new man” for “making socialism work.”
On June 29th, 2008, another long-desired achievement befell all Spaniards, something of great consequence for the massive and record-setting Spanish TV audience: Spain played and won the Euro Cup final. While Spain’s two great soccer teams, Real Madrid and Barcelona, won many competitions and honors, Spain had not won the global competition in nearly 50 years. Spain’s living rooms and bars exploded in jubilation and a joyous eruption pervaded all over the country’s main squares. There was chanting of “I am Spanish, Spanish, Spanish” in Placa Catalunya in Barcelona, a prominent site for many of today’s regular separatist gatherings.
Nevertheless, the good times came to an end. The financial crisis hit in September 2008 and Spain’s economy, consisting mainly of tourism and a construction boom, proved extremely vulnerable. Spain experienced one of the largest housing bubble bursts in the Western world. Credit dried up. Nothing new was sold or built. There was more supply than demand. The economy ground to a halt. Unemployment skyrocketed.
THE CRISIS PERIOD
Zapatero attempted a counter-cyclical fiscal policy—increased government spending or reducing taxation during periods of weak private sector demand, and the reverse during periods of increased private sector demand—much in the same way the United States implemented the American Recovery and Reinvestment Act in early 2009. Yet, soon thereafter, the 2010 Greek debt crisis hit and the tide of economic policy formulation shifted in the Eurozone. During the tenure of Jean-Claude Tichet, the European Central Bank (ECB) raised short-term interest rates and demands for fiscal austerity reached a fever pitch. Spain was forced to reverse course and implement austerity. The lack of economic growth meant less tax revenue and more spending on automatic stabilizers (such as unemployment insurance and other social subsidies).
Consequently, while Spain went into the crisis with balanced budgets and a moderately low debt-to-GDP ratio, all of it was quickly undone. By 2012, Zapatero had been voted out, unemployment had topped 20 percent, and Spain was on the verge of requiring a bank bailout. Stores had been boarded up and, for the first time in a generation, a statistically significant portion of Spaniards suffered from hunger. Young, well-educated Spaniards, unable to find employment, emigrated in droves to Britain and Germany.
Then, Mario Draghi, the new ECB president, stated the ECB would do “whatever it takes” to protect the euro and return calm to financial markets. By a hair, Spain did not have to resort to a corralito (a freezing of bank accounts to preclude a run) as was the case in Greece in the summer of 2015.
“After several years of devastating economic misery, growth returned beginning in 2014. In fact, Spain has been one of the fastest growing economies in the Eurozone for the past few years. It has been growing at a rate of three percent and unemployment has fallen below 20 percent.”
After several years of devastating economic misery, growth returned beginning in 2014. In fact, Spain has been one of the fastest growing economies in the Eurozone for the past few years. It has been growing at a rate of three percent and unemployment has fallen below 20 percent. So, if growth has been restored, and unemployment continues to decline, why was PP not easily re-elected? The answer is corruption.
“BE STRONG, LUIS”
In 2013, this is what Mariano Rajoy, the current prime minister, privately texted to Luis Barcenas, the former PP treasurer, after the latter was caught stealing and laundering millions of euros in the service of enriching himself, his colleagues, and financing PP’s election campaigns. Luis Barcenas kept detailed records of all of his financial irregularities. It turned out Mariano Rajoy, along with most of the leaders of PP, personally enriched himself through illegal and undocumented donations to the party. Despite an outcry among the Spanish public, Rajoy refused to resign. While there was never sufficient evidence to convict him in a court of law, he was found guilty in the court of public opinion. Luis Barcenas went to jail for a while (he is now out on a technicality), but was not alone. In the years that followed, dozens of high profile PP officials, including most of the PP high command in Madrid, served time in prison or at a minimum were indicted on corruption charges.
Surprisingly, the other major party, PSOE, suffered far less than its rival from the ethical cancer that is corruption. Corruption was plentiful in PSOE as well, but it was concentrated regionally. Almost all of its operations in Andalusia were involved in a scandal, but few allegations were made or proven about the most prominent PSOE figures at the national level, ranging from the previous prime ministers to the cabinet ministers.
WHERE THINGS STAND TODAY
With this amount of slime lurking in Spanish politics, Spanish voters with a desire for clean partisan politics turned to new parties. Thus, disaffected PP voters flocked to Ciudadanos and disaffected PSOE voters turned to Podemos. Now, after a second general election, Spain remains stuck at a four-way political impasse. The country will most likely unstick itself one way or another within the foreseeable future. Increased awareness of the societal ill of corruption has made people less tolerant of it. The most flagrant abusers have been put behind bars and their names have not been forgotten. It is not unlikely these scandals will forge a change of culture much like the scandals of the Gilded Age begot the beginnings of the Progressive Era of clean politics in the form of civil service reform in the United States.
Additionally, unlike in Britain, the EU is popular in Spain. There is no impending “Spexit.” The country has prospered without a new government in the seven months since the December general election of last year. The finance minister, Luis de Guindos, just announced Spain will beat previous GDP forecasts for this year and grow by 3.2 percent. So, either PP will find the remote support it needs and form a government in the coming months or the country will head into a third general election to finally resolve the political impasse. Either way, it will all be easier now that economic good times no longer look as distant.
Image: Demonstration in front of the People’s Party headquarters protesting against the Barcenas’ affair (2 February 2013). (Popicinio/Flickr, Editorial Use)
Marco F. Moratilla works for New Magellan Venture Partners, LLC, a venture capital firm. He has experience at the National Security Archive and the U.S. House of Representatives. He holds an M.A. in international affairs from The George Washington University and a B.A. in political science from the University of California, San Diego. His work has appeared in International Affairs Review. A native Californian, he spent his formative years in Madrid, Spain.