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12/16/15

Waiting on the Spanish vote: Implications for Europe’s economy

2015 has been a dismal year for the European political elite, as its hold on power has been challenged by a wave of popular discontent across the continent.

Spain’s parliamentary elections this Sunday are likely to further underline the trend towards European political fragmentation. They are all but certain to result in a minority Spanish government, thereby confirming that Spain will have moved away from its traditional two- party system to a less stable four-party system.

Election campaign posters of Spanish Prime Minister Mariano Rajoy (L), Socialist party (PSOE) leader Pedro Sanchez (2nd L) and Ciudadanos party leader Albert Rivera (R, below), three of the four leading candidates for Spain's national election, in a park in Guadalajara, Spain, December 15, 2015. REUTERS/Susana Vera.

Election campaign posters of Spanish Prime Minister Mariano Rajoy (L), Socialist party (PSOE) leader Pedro Sanchez (2nd L) and Ciudadanos party leader Albert Rivera (R, below), three of the four leading candidates for Spain’s national election, in a park in Guadalajara, Spain, December 15, 2015. REUTERS/Susana Vera.

Over the past year, Europe’s ongoing poor economic performance has proved to be highly problematic for a number of centrist establishment governments. In Greece, at the beginning of the year, Alex Tsipras’s far-left Syriza Party took over government from the centrist New Democracy Party. More recently, in the aftermath of Portugal’s November elections, a left leaning anti-austerity bloc under the leadership of Antonio Costa took over government in Lisbon. Perhaps more troubling yet, this month in French regional elections, Marine Le Pen’s anti-European and xenophobic National Front Party proved to be the most popular political party in France.

The final electoral polls before Sunday’s election in Spain suggest that Spain too will see an end to a majority government of the political center. Those polls suggest that Mariano Rajoy’s center-right Partido Popular will see its vote reduced from around 45% in the 2011 parliamentary elections to barely 27%  in this election. Meanwhile, the two upstart parties, Ciudadanos and Podemos, have both been riding a wave of popular resentment with the political establishment. They are projected to each poll close to 20% of the vote, and this would place them on par with the more established Socialist Party.

Political observers expect that the government most probable to emerge from Sunday’s elections will be one formed by a coalition of Partido Popular and Ciudadanos. However, judging by Portugal’s recent experience, one cannot rule out the formation of a more left-leaning government.

In any event, we can be certain about one thing: Spain will be getting a minority government that is very likely to prove much less stable than the outgoing Partido Popular government.

One has to hope that Europe’s policymakers will see how politics continues to fragment as a result of years of sub-par European economic growth. Maybe that will shake them out of complacency and galvanize them to embrace those structural economic reforms that might place Europe on a more favorable economic growth path.



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