Well, it happened. This past November, Spain’s Socialists (PSOE) got hammered at the polls and (after failing twice before) incoming Prime Minister Mariano Rajoy of the nation’s conservative Popular Party (PP), got his absolute majority in Congress. Next week he will be sworn into office. Now what? There is little doubt that the incoming Rajoy administration will move quickly to reform Spain’s economy. Rajoy spoke about this idea at length during his campaign. Nevertheless, his plans for economic reform were high on rhetoric, but lacked specificity.
Cutting down on unemployment (which is still above 20 percent) and labor market reform are essential. The recapitalization of Spanish banks and broader banking sector reform are other areas to concentrate on. Tax reform and a reexamination of the Spanish pension system should follow thereafter. Since Rajoy has garnered an absolute majority in Congress, the main question is how and the PP will prioritize Spain’s sorely-needed economic reforms. As a corollary, it remains unclear how widely Rajoy will interpret his mandate. Will he push sweeping economic reforms through congress without even consulting opposition parties? No matter what Rajoy and the PP do, regional tensions in the Basque country and Catalonia will remain.
Interestingly, just days before the November 20th vote, Spain’s “Indignados” set out a few clear, yet modest policy goals. Their desired reforms focused largely on changing existing property laws and modifying Spain’s electoral system, potentially giving a greater voice to smaller parties. While it is unlikely that Rajoy will touch on these issues next year, they are mature, reasonable requests that deserve the attention of Spanish policymakers in the years to come.
The Balance between Domestic and International
Nobody is questioning the gravity of Spain’s current economic situation. Nonetheless, a big country in Europe (even if 2012 is largely about economic reform) cannot operate without a foreign policy. The incoming Rajoy administration has the potential to articulate some profoundly different foreign policy positions than those of his predecessor, particularly as it relates to collaboration with the US and more generally in multilateral institutions like the European Union or NATO.
While Spain’s days a global power are long gone, the country’s diplomatic role is not insignificant—within Europe more generally, but especially as it relates to political development and the politics of foreign aid in Latin America. Still, Spain’s influence abroad should not be overstated either. As far as US-Spanish relations, they should improve significantly, but that is not saying much. Ties between the US and Spain have been virtually nonexistent since 2004, when outgoing prime minister Jose Luis Rodríguez Zapatero condemned George W. Bush’s unilateralist foreign policy and quickly got Spanish soldiers out of Iraq.
But again, Spain’s precipitous Iraq withdrawal—and Zapatero’s concomitant public repudiation of Bush’s foreign policy, while not trivial, was largely symbolic. Iraq was Bush’s war and Spain’s commitment of 1,300 troops could hardly be described as a pivotal factor regarding military operations. In the run up to the Iraq invasion, Jose María Aznar’s support of the invasion was greatly appreciated in Washington.
But, could anyone really argue that Spanish influence was anything close to decisive? Or that Aznar’s voice was anywhere near as influential as Tony Blair’s had been at the time? Spain remains a second-tier power in Europe and will continue to punch below its weight in the coming years. The UK, Germany and France are for more influential abroad, with Spanish policy in Latin America possibly being the only exception to this.
As United States Secretary of State Hillary Clinton proclaimed earlier this year, Spain has a crucial role to play in Latin America and is second (behind the US) when it comes to foreign aid in the region. If Spain were to make sharp cuts to international aid in Latin America, Spanish influence in the region would likely weaken. While Spanish assistance does not necessarily come free of conditions, their approach to international aid has typically been far less preachy — when it comes to human rights and democracy — than that of the United States. Making it all the more likely that it is money that would be sorely missed.
Zapatero and the Socialists have lost the right to govern Spain. November’s elections were less of a commanding victory for Rajoy and more a rejection of Socialist party governance. Even so, Rajoy is walking into a mess. Nobody likes austerity. If possible, he and the PP should try to work with the Socialists, particularly as it relates to labor market reform. Yet compromise seems unlikely. If that is the case, Prime Minister Rajoy will need to show he has the mettle to move quickly. Under Zapatero’s watch, Spanish citizens have witnessed how dangerous political inaction can be. They do not deserve four more years of ineptitude.