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Spain's Political Mess Is a Blessing, Not a Curse

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Spain faces the choice between a third general election in a year or a government based on some painful, improbable compromises. At first glance, this looks like a case study on the dysfunction of European parliamentary democracy. It is, however, nothing of the kind.

I've heard many Americans say that whoever wins the presidential election, the country will more or less run itself. That's not just true in the U.S.: No country with strong local authorities and a professional bureaucracy needs to be actively governed all the time. Spain's experience since the December 2015 election -- which left it with a caretaker government until another inconclusive election this June -- proves it. 

The country's annualized economic growth rate in the last four full quarters has been comfortably above 3 percent, beating not just France and Germany but also some faster-growing eastern European countries -- all with duly elected, properly functioning governments. 

No Government? No Problem
Annualized GDP growth rates (seasonally adjusted, at constant 2010 prices)
 
Source: Bloomberg

Other economic indicators have been steadily improving. Unemployment has fallen every month since October 2015, dropping to 19.6 percent in July from 21.2 percent. This summer, there has been a bigger-than-usual tourism boom due to terrorist attacks in France and Turkey and Greece's continued economic malaise, but industrial production has been growing, too, as have retail sales, so locals have done no less to boost the economy than tourists. 

Caretaker Prime Minister Mariano Rajoy gets a lot of criticism for his embrace of austerity, but the labor reforms he pushed through while his government enjoyed a parliamentary majority -- businesses are now able to make their own bargaining agreements with unions, and it's become cheaper to fire workers -- are still having an effect. Spain is at a point where no radical change is required for things to go in the right direction.

It might have helped the economy to expand even faster if Spain could increase government spending. All it could do for 2016 was lock in 2015 spending levels, and that's likely to happen for next year as well: There is no time to work out a different budget and push it through a fractious parliament. On the other hand, a leftist election victory could have destabilized government finances, so living with the same budget year after year is not the worst scenario.

This, of course, cannot go on forever. A country does eventually need a legitimate government, not a stand-in one. But Spanish voters and politicians aren't exactly wasting time replaying elections and coalition negotiations.

In the June election, Rajoy's People's Party improved on its December result, though it fell well short of a majority. This shows voters are beginning to appreciate the economic improvement, which they were of a mind to disregard late last year because of pent-up anger over austerity and high-level corruption in the People's Party.

At the same time, the disruptor Podemos party barely improved its showing despite its coalition with another leftist party, failing to beat the traditional Socialists. Together, the Unidos Podemos alliance created by Podemos and other left-wing groups lost more than a million votes. Despite corruption charges and continuing allegations, the centrist parties that have run Spain for decades have retained their leading positions, and that's an important result.

If the "run, fail to agree, set up another election" pattern repeated itself once or twice, Rajoy's party would likely be able to build a coalition with the center-right upstart Ciudadanos party. That has prompted some feverish activity on the left flank, but leftist parties don't have a majority even if they make a deal. Both the right-wing and left-wing contenders are forced to talk to smaller regional parties, including Basque and Catalan secessionists, in hopes of finding a compromise -- something that used to be anathema to the mainstream political forces.

This is a much better setup than Spain faced late last year, when the country appeared to be irreconcilably split. It has taken close to a year and no deals have been reached, but politicians now know every nuance of their rivals' positions, and they've worked out their priorities. Every political force has had a chance to make itself heard and to try on every possible alliance -- and every voter has someone to root for. That's a messy process, but it's a more or less public one, and it's ultimately constructive.

If Spain had a first-past-the-post system, Rajoy would have won and formed a government back in December. Yet his legitimacy would have been questionable, many Spaniards would feel unrepresented, and a populist force like Podemos could keep increasing its popularity and win the next election. In a way, these are the mechanics that have put Donald Trump within reach of the U.S. presidency.

The European system puts up a better defense against such an eventuality simply by giving representative democracy a better chance. That can slow things down sometimes, but, as Spain's economic performance shows, that's not a particularly high price to pay for an eventual result that most people will understand and recognize.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net