Spain

Spain: Will the strong economic growth last

A good year ago, on 22nd January 2016, the first attempt to form a coalition failed in Spain. This was followed by a prolonged period of political gridlock. Many economic policy measures were shelved for the time being. Until today, even the budget for the current year 2017 has not yet been adopted. It took until October 2016 for the major parties to agree to tolerate a minority government led by former Prime Minister Mariano Rajoy. Since then, the political wheels have been turning at full speed. So far, though, the political deadlock does not appear to have visibly damaged the Spanish economy. Indifferent to all this, economic growth remains at a high level. Since the second half of 2014, strong quarter-on-quarter growth rates have been recorded in each quarter of between 0.6 and 1.0 percent. And for the final quarter of 2016, the indicators available until now signal renewed strong…

Spain: Reform policies pay off – they must only be continued

After eight months and two rounds of general elections, Spain’s parliamentarians have still not succeeded in establishing a new government. Rajoy, the prime minister to date, is therefore only a caretaker prime minister. What is problematic is that the cabinet is not permitted to submit new bills to parliament and therefore simply administers the status quo. Despite the economic successes, the popularity of Rajoy and his conservative party has fallen. Corruption scandals have weakened confidence in the established parties and courageous structural reforms have led to painful cuts for the population. The reforms to date no doubt played a key role in Spain managing to come out of recession and now being in a strong economic upturn. Core elements of the economic reform programme were reforms to labour law to enable greater flexibility. Protection against termination was eased and collective bargaining agreements made more flexible. There have also been extensive…