"The Spanish slump – political crisis and the need for institutional reform", Julie Cantalou

Julie Cantalou, European Affairs Manager, 17-VI-13.
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Spain is caught in a vicious circle of debt crisis, low productivity, unemployment, public mistrust and centrifugal forces from which it does not seem to be able to emerge. At the end of April 2013, the government had to correct its economic forecast: The economy will shrink by 1.3% in 2013, compared to a previous estimate of 0.5%. Furthermore, a new record number of 6.2 million unemployed was announced. The government had to admit that the results of the previous reforms have not yet shown the expected results. On Friday, 29 of April, under pressure of the EU, Mariano Rajoy’s government presented a new austerity package to tackle public debt and the economic crisis. What is striking in the new reform package is a firm commitment to reduce the budget deficit. But the package does not include new measures; most are an extension or deepening of previous reforms.

What is even more striking is the government’s lack of commitment to in depth institutional reform. The conservatives are not willing to open the debate about the institutional changes that are requested by the citizens and necessary for economic recovery. An in depth assessment of the key democratic institutions, governing aspects such as the electoral law, the party law and the structure of the state, while advocated by many political actors, the civil society and the academia, are not being addressed by the traditional two parties – PP and PSOE.

To overcome the current economic and political crisis, Spain needs more than new policies, it needs a new institutional framework.


Political system in doubt

Apart from a deep economic crisis and its social consequences, Spain is suffering an endless political crisis. Record high disaffection, triggered by the economic crisis, has been looming for many years due to what the Spanish call “partitocracia”, a political two-party system characterized by very strong and rigid political parties, combined with corruption cases at all levels of government and political parties. Apart from the government and the political parties, the political crisis also affects the political and administrative system of the 17 Comunidades Autónomas introduced during democratic transition in the 1970’. Especially tensions between the central government and the autonomous government of Catalonia have exacerbated as a result of the unionist position of the conservative government of Mariano Rajoy and the economic crisis. Lately, even the governing Partido Popular starts crumbling. On 21 of May former Prime Minister José-Maria Aznar openly criticized his party leader Mariano Rajoy. Latest polls published by Metroscopia[i] on voting intentions also reflect the deterioration of the two-party system. 76% of people interviewed declared that they disapprove of Mariano Rajoy’s action as prime minister, while 84% of them do not trust him.

Corruption: undermining people’s trust in the political system

Korruption_oroyplata_flickrLately, there is not a single day without a new corruption case being revealed or a politician being convicted for alleged corruption. Currently, around 730 politicians are being prosecuted for alleged corruption cases at national, regional and local level. Earlier this year, a case of bribery supposedly organized by the ex-treasurer of the governing Partido Popular, Luís Bárcenas, was revealed by the newspaper El País documenting that funds from important businesses were being used to “complement” the party members’ salaries in exchange for construction permits and favours. Not even the royal family seems to be “clean” since the princess Christina has been charged for her involvement in the corruption case in which her husband Iñaki Urdangarin is being accused of diverting public funds for the organization of a variety of sports events to his own accounts.

These serious allegations have once again confirmed popular distrust in Spanish politics, adding up to the numerous cases of corruption that have monopolized media attention over the past years. Corruption in Spain seems to be present at all government levels and spares no major political party, though the worst cases that have been revealed lately are associated with members of the ruling Partido Popular. The most frequent pattern of corruption is illegal party financing with funds from big private companies, especially construction companies, thus linking these bribery cases to the real estate boom.[ii]

What are the causes of such widespread corruption? Certainly, arguments blaming corruption on Spanish cultural attributes do not give satisfactory answers. Some of the main problems raised by academics and civil society groups are the lack of adequate legislation in matters such as political party financing, the lack of a right to information act, the inefficient and politicized judiciary system as well as the absence of accountability mechanisms. A perfect example is the Spanish Court of Audit that is in charge of auditing government accounts. Its second task is to audit the financing of political parties and the electoral processes. On paper, the agency is legally independent, in practice it is influenced by the two major political parties (PP and PSOE), thus not very effective in controlling the efficiency and effectiveness of the public sector.

Another major issue is the lack of independence of the judicial system. Although judicial independence is explicitly recognized in the Spanish Constitution and legally guaranteed, the judiciary is politicized as members of the higher courts are appointed under political influence.[iii]

In order to tackle corruption in Spain Transparency International issued several recommendations[iv]:

  • Stronger political financing regulations and more resources for monitoring mechanisms are needed.
  • To improve integrity in the judiciary, de-politicisation of the supreme bodies of the judicial power and the Constitutional Court are needed.
  • Access to information reforms are needed to ensure the transparency of public institutions. The government should also adopt a strategic plan to improve responses, accessibility, as well as citizen participation and collaboration in public affairs.

The Spanish parliament is currently debating the government’s proposal for an Access to Information Act (Ley de Transparencia). This bill is long due as Spain is one of the few European countries that have not yet enacted such a law. In view of the growing mistrust towards the political system, the bill might come at the right time to calm things down. Even the royal family has requested to be subject to the transparency law, although under a special status. However, the fact that only few corruption cases actually lead to convictions and/or politicians resigning, the transparency law will not rebuild trust in democratic institutions. Only a groundbreaking change in political party structure can regain citizen’s trust in a pluralistic representative democracy.


During the Spanish transition, strong political parties were set up to guarantee political pluralism and alternative political ideologies in contrast to the previous 40 years of fascist dictatorship. In Spain, the nomination of candidates for electoral lists and important mandates within the party is mainly determined by the party leaders. Internal democratic processes leading to nomination are deficient. Furthermore, electoral lists are closed and voters can only express their preference for a list/party but not for a specific candidate. Closed lists give parties the power to keep politicians in the game although they are unpopular and/or incapable. Manuel Fraga Iribarne, minister during the Franco regime, and after the transition president of the Junta de Galicia and Senator for the Partido Popular, might be the most famous such case.

The Spanish legislative branch lacks efficient democratic processes due to the strong influence of political party leaders within parties. High-ranking party leaders decide if MPs are to remain on the party’s lists, not the party members. MPs therefore have more incentive to be loyal to their party leaders than to their constituency. This practice limits innovative propositions from potential candidates, it limits MPs’ independent vote and deters whistleblowing, especially with regard to bribery or corruption. Closed and blocked voting lists also favour a system in which the party leaders maintain strong control over the representative bodies on the national, regional and local level. Finally, prevailing internal voting discipline of elected representatives increases citizen’s mistrust. The latest such case, when the MPs of the Catalan Socialist Party decided to vote in favour of the motion for the Right to Decide (on holding a Catalan referendum for independence) against the recommendation of the Spanish Socialist Party, highlighted the problem of having internal voting discipline. The MPs of the Catalan Socialist Party were sanctioned for their misbehaviour with a fine and/or exclusion from the party.

The Spanish political parties have come to completely monopolize the economic, social and political scene and a nearly bipartisan system has progressively been installed. Indeed, in Spain the two major political parties – PP and PSOE – control a broad range of institutions reaching from savings banks, universities and the media until the judiciary system.

With regard to the financial crisis and the problems of the banking sector the case of the savings banks (Cajas de Ahorro) is especially interesting: Spanish political parties on the national, regional and local level, receive more than 90% of their funding from the State. The logic of such a system is that by relying primarily on public funds, parties can operate more independently and remain detached from private funders‘ agenda. However, the parties have over time indebted themselves and used bank loans to cover additional expenses. Political parties have progressively politicized the savings banks in order to ensure funding. The strong links between the two major parties and the banking sector in party financing is a concern for political capture.

Transparency International and Spanish civil society organisations recommend a thorough reform of the electoral and party system. Reforms should include unlocking the closed voting lists and improving proportionality, neutralizing political party internal control, and stimulating its internal democracy is also needed. One possibility would be to open the primaries to all citizens. At the regional level, the Catalan Parliament is currently debating a proposal for a new electoral law. Although the “Estatut” – the Catalan Statute of Autonomy– foresees the possibility to have a regional electoral law, up to now the 2/3 parliamentary majority needed for its approval had not been reached and thus the Spanish electoral law was applied. The proposed law includes certain recommendations such as introducing open electoral lists and improving intraparty democracy. Such a thorough electoral law reform is urgently needed at the national level, if the Spanish representative system is to regain citizen’s trust. Work in this direction has been initiated by the platform “for a new party law” (www.porunanuevaleydepartidos.es), which aims at collecting the necessary signatures to petition the parliament to propose a new legislation on political party regulation and financing.

Growing disaffection and anti-establishment movements

According to latest data, citizen involvement in politics in Spain is very low[v]. Only 3,9% of the people interviewed in the latest study of the Fundación BBVA in Spain are member of a political party, one of the lowest levels in Europe. Additionally, political participation in Spain is often limited to street manifestations and strikes. The low rates of interest and involvement in politics are a combined consequence of the economic crisis, the corruption scandals and the above-mentioned flaws of the democratic and party system.Indignados_gichristof_flickr

The corruption cases in party financing together with the partitocratic system, have contributed to undermine representative democracy in Spain. Indeed, representative democracy can only work with a pluralistic party system, representing people’s preferences. However, Spanish citizens seem to profoundly distrust political parties. In the latest Eurobarometer, to the question about how much they trust political parties, 91% of Spanish citizens interviewed answered that they distrust them, one of the highest percentages in the EU, only topped by Greece. In comparison, the EU is seen as a source of stability and wealth. The latest Eurobarometer shows, that 73% of Spanish citizens feel European, while this percentage amounts to 63% for the whole EU. They also trust EU institutions (20%) far more than their national government and parliament (11% and 9% respectively), though trust is low compared with the overall EU (33%)[vi].

Spanish citizens, especially the youth, are progressively turning away from traditional politics. More or less organized new civic movements are emerging, interpreted by some as a real revolution and disregarded by others as mere social unrest. Although the massive protest movement which took the streets in 2011 and partly lives up until now – known either as the “movimiento 15-M” or the “indignados” (the outraged) – is very disorganized and utopic in its claims, it should be taken seriously. Firstly, for its size. According to the media, between 6.5 and 8 million Spaniards have participated in these protests, which started simultaneously in 58 cities on 15 March 2011. Secondly, because the mass protest cannot simply be explained as a consequence of the economic crisis. Protesters form a heterogeneous and ambiguous group, but they share a strong rejection for Spanish politicians, the current two-party system and corruption. People took the streets because they do not consider themselves to be represented by any traditional party nor favoured by the measures approved by politicians.

Out of the anarchic set of claims the “indignados” voiced during their protest, some have been taken up and channeled through civic platforms and associations such as change.org, acces-info.org or at a regional level by Acció per la Democràcia. These organisations are successfully acting as lobby organisations in favour of changes in the political system, such as the access to information act or the electoral system. The Friedrich Naumann Foundation for Freedom has been supporting such pro-democracy initiatives. In November 2012, the Foundation, jointly with Acció per la Democràcia, organized a conference on the electoral reform with Professor Dieter Nohlen[vii]. At the same time, we can observe the emergence or the strengthening of certain alternative parties, which tend to a rather populist rhetoric.

Rejection of the two party system – a chance for liberalism in Spain?

Polls of Metroscopia[viii] published on 10 June reflect strong popular rejection for the two traditional parties PP and PSOE. In case new general elections would be held next month, the Partido Popular would only get 24,5% of the votes, while the Socialist Party (PSOE) would reach 21,5% of the votes. Compared to 44,6% and 28,7% of votes respectively they won in the general elections of November 2011, both party present signs of fatigue and lack of trust among citizens.

The votes lost by the PP and the PSOE since the last general elections in 2011 are being rechanneled either to alternative political parties or citizens simply decide to vote blank. According to the Metroscopia polls, 16,8% of people interviewed would vote for the left-wing party Izquierda Unida and 13,4% for the centrist party Unión Progreso y Democracia. This represents an increase since the general elections of November 2011 of 9,9% and 8,7% respectively. Blank votes would increase from 1,9 to 6,6%.

Unión Progreso y Democracia (UPyD) is a centrist party founded in 2007, according to its manifesto in opposition to the two-party system and to regenerate the Spanish democracy. In contrary to what is sometimes presented in foreign newspapers UPyD is not an equivalent to the German FDP. The word liberal is missing both in their founding manifesto and their electoral programme for the general elections in 2011. Furthermore, UPyD does not defend subsidiarity and a federal state, but rather the transfer of regional competences to the central government. The only common characteristic of the FDP and UPyD is their position in the center of the political spectrum; they offer an alternative to traditional social-democrat and conservative parties.

UPyD leader, former MEP Rosa Díez, left the Socialist Party due to strong opposition with party leader José Luís Zapatero on several issues, especially the negotiations with terrorist group ETA. Ideologically, the party cannot be categorized as being left or right wing; it defines itself as being progressive. UPyD opposes nationalism and regionalism in Spain, asks for the complete separation of state and church and a new electoral law. The party rejects Basque and Catalan nationalism and wants to change the electoral law as it favours regional parties from Spain’s autonomous communities. Instead, it wants to strengthen the central government and the concept of a unitary Spanish nation.

UPyD has been strongly criticized for being a populist party centered around the personality of Rosa Díez. Its lack of internal democracy combined with authoritarian leadership of Rosa Díez has led many members to leave the party. Often, UPyD has also been criticized for opposing regional nationalism with Spanish nationalism instead of arguments. Due to its opposition to regional political parties it stands in strong opposition to regional liberal parties such as the Catalan CDC. In view of the current increase of nationalist and federalist claims, the centralist stance of UPyD exacerbates the tense relationship between central and regional governments.

In view of the current political crisis, especially of the two-party system, some could hope that there is a chance for alternative political ideologies to emerge or strengthen. A Spanish liberal party or parties could take advantage from the lack of democratic legitimacy of the two-party system and channel people’s claims. Liberal parties in Spain however face a few major problems.

Firstly, Spain does not have a tradition of liberal parties. This is mainly due to a 40 year-long fascist dictatorship during which pro-democratic opposition developed in communist and socialist spheres in opposition to the right-wing regime. Traditionally, in Spain pro-democracy, Human Rights and individual rights movements have been a prerogative of the left. Only small groups and parties, such as the Partido por la Libertad Individual, exist at the national level and up to now they have not been able to be elected to regional or national parliaments or governments. Liberal parties in Spain would thus have to start nearly from scratch. The Iberian Liberal Forum (ILF)[ix] may offer a chance for more and better cooperation. The ILF is a yearly gathering of liberal organisations throughout the Iberian Peninsula with the aim to better coordinate their action and develop common liberal answers to the Peninsula’s challenges. The Friedrich Naumann Foundation for Freedom supported its efforts over the last years.

Furthermore, liberalism, as is the case in several other European countries such as Portugal and France, is perceived as an extractive political ideology favouring the ruling elite against the working class. Capitalism is seen by many as the origin of the economic and social crisis and thus liberalism as a political ideology aggravating the problem instead of offering solutions to the crisis. Many members of the anti-establishment movement in Spain blame liberal policies for the crisis and ask for more control by the state and more regulation, instead of more efficient regulation and more separation of power. It seems contradictory, that although Spanish citizens blame politicians for their policies and for the impact of the reforms undertaken, their preference for a strong social welfare state controlling the economy is much higher than in other European member states (81% vs. 66% for the whole EU)[x]. The misuse of the word liberalism by representatives of the conservative Partido Popular as being a characteristic of the policies they propose certainly aggravates the negative perceptions about liberalism.

Liberal parties have been able to organize mainly at regional level and have articulated their claims against the centralisation process pushed by the two traditional parties PP and PSOE. They are advocating a political alternative to the inefficient centralistic tendencies of the two-party system. Catalonia is the only region in Spain where organized liberalism has a long-standing tradition. The economic structure of the region combined with the importance of independent professions and their associations in the Catalan economy may be the main explanatory factors for that. Indeed, the main industries in Catalonia – textile, pharmaceutical, chemical, automobile – do not depend on the state and therefore do not need to maintain such close ties with the political elite, on the contrary, liberal policies favour them.

The challenge for liberal parties in Spain will be to differentiate themselves from the conservative ruling party and convince the voters that their policies are not favouring the ruling elite, but offer an alternative for everyone. However, as long as the Spanish economy remains based on sectors that tend to need the collaboration of the state to make business – construction, telecommunication, transport – the economic elite will not be in favour of liberal policies, as they may lose their prerogatives.

Catalonia – next member state of the EU?

Spain is structured under a system known as the state of autonomies (Comunidades Autónomas). Each Comunidad Autónoma is governed according to its own Statute of Autonomy, which is negotiated with the central government and contains all the competences that they assume. The regions have their own parliament and president. The Basque country is the region with most competences, as for historical reason it is the only one to hold fiscal competences. In the latest years however, the state of autonomies has revealed its limits to solve tensions between regional and central governments. The request for further devolution of competences of the Basque country and Catalonia, which are the richest and most dynamic communities, has been disregarded by both socialist and conservative central governments. The tension between the central government and peripheral nationalism has reached a point that looks like no-return.SONY DSC

On January 23, 2013 the Catalan Parliament adopted a “declaration of sovereignty and the right to decide of the Catalan people” with 85 votes in favour, 41 oppositions and 2 abstentions. The motion for a resolution was put forward by the sovereignist[xi] coalition of Esquerra Republicana (independentist left), Iniciativa (independentist green party) and the governing Convergència i Unió. The resolution declares that the Catalan people have a right to decide on their political future. It aims at initiating the process of a consultation of the Catalan people on the independence from Spain.

The resolution has triggered a variety of reactions, sometimes even violent ones, by the central state and some political parties. The Spanish government did not follow the British example with regard to Scotland and refused to sign an agreement with the Catalan government on holding a referendum. Thus, the Catalan government cannot legally hold a referendum using the official voter registry with the central government opposing it. But it may organize a public consultation on the basis of the regional census.

Catalan President, Artur Mas, has announced that he aims at holding the consultation in 2014, though no concrete date has yet been set. The year 2014 has been chosen for its symbolism, as Catalonia could regain its independence after 300 years[xii]. Some rumours have it that the best date would be to organize the referendum on the same date as the Scottish one in order to highlight the difference between the negotiated relation between the British government and the Scots, and the refusal of a dialogue by the Spanish central government. However, the political capital of Artur Mas’ party, Convergència i Unió, is steadily shrinking due to the harsh cuts in public spending they implemented to reduce public deficit combined with tensions in the sovereignist coalition with Esquerra Republicana. In view of the decreasing support for the ruling coalition it might not be smart to wait until the autumn of 2014.

For the time being, Artur Mas has established an advisory board – Consell Assessor per a la Transició Nacional – of 14 specialists in a variety of fields in order to develop proposals on the organisation of the future state. They have been tasked with the elaboration of recommendations on topics such as fiscal policy, the set-up of a central bank, defense, infrastructure, education, statehood, etc. A major issue of a process leading towards independence would be the repartition of assets and debts between Spain and the newly created Catalan state. Thus, the members of the advisory board were also asked to design a scheme on how to split the public debt, the pension system and other assets, such as historical heritage. The advisory board will come up with proposals on the organisation of the referendum before the summer break. Subsequently, the second set of recommendations will address the process of separating from the Spanish state in case of a positive outcome in the referendum. The third and last report will define the economic and political structure of the newly created state.

The intention to hold a referendum has provoked a series of discussions on the economic and political consequences such a move could have. Many debates evolve around the economic cost independence would have for Catalonia. The region, with its 32,114 km2 and 7,5 Mio inhabitants, counts a strong industry, high quality universities and business schools, and is well connected to the European and global markets. The economic viability of Catalonia as a state is thus not in question. But how much will the setting up of a new state cost the Catalan people? As economist Robert J. Barro put it “We can usually judge whether the benefits from change exceed the costs by relying on self-determination. After all, most of the costs from changing governments and establishing institutions are borne by the secessionists – if a clear majority of residents in an area indicates their desire to become independent, then they are saying that the benefits exceed the costs.”[xiii]

In Brussels, the announcement of a referendum for the independence of Catalonia has been met with caution. Up to now the debate seems to evolve around the question if the independent state would remain in the European Union. A question that has led to a variety of theories, but no clear answers, due to the fact that it would be the first time such a situation arises. Indeed, unlike in a traditional accession process, Catalonia would not have to adopt the acquis communautaire, however the unanimity in the Council would remain a requirement to become a member state. The advocates of a unified Spain have used this argument to deter Catalans from voting in favour of independence, claiming that Spain could oppose the accession of Catalonia to the EU. There are however, two major arguments against this warning. Firstly, the Catalan people are European citizens and the European court of justice could denounce the Spanish position, as it would de facto revoke their European citizenship rights. Secondly, if all other accession criteria are met and the opposition of Spain only aims at “punishing” the Catalan people for their choice or avoiding further regions to split, their position in the Council would be abusive, insofar, as the EU is also a Union of Citizens and not only of member states.

Speculations on the outcome of the referendum, as well as its economic and political consequences will continue monopolizing the political scene and the media up to the organisation of the vote. Currently, there are no reliable polls on the outcome of the vote and it is difficult to guess what will happen in case a majority of voters is in favour. It is crucial to distinguish between what the Catalan people have named their Right to Decide and the possible outcome of the vote. European observers should not position themselves in favour or against Catalan independence, but rather support or at least respect the democratic expression of their choice. A liberal observer has to recognize the legitimacy of such a democratic process.


In his article entitled “When did things go wrong: Three hypotheses”[xiv] Luis Garicano, professor at the London School of Economics, puts forward three hypotheses to explain the underlying causes of the economic, social and political slump, especially corruption, in which Spain seems to be stuck. His first hypothesis relates the crisis to the explosion of the real estate bubble, which has damaged economic and political institutions. Corruption was inevitable in an environment characterized by mismanagement, lack of efficient regulation of the financial sector and absence of urbanisation plans, which created an environment where anything goes. The second hypothesis takes the cause further back in time and blames the compromise struck during the democratic transition. The central state set up the Comunidades Autónomas from the top down and all other institutions, such as the judicial system and the banking sector, were built based on a quota system between the conservatives and the socialists. His third hypothesis reaches back 300 years and relates the failure of Spanish institutions to the centralization process initiated after the Succession war by king Felipe V.

The current problems cannot easily be related to one or the other hypothesis; all three might carry a share of the explanation. What is most interesting in this article is the importance given to the institutions in determining the economic and political developments in a country. Certainly, if Spain wants to recover from the economic crisis and more importantly reduce the impact of future shocks, it needs to reevaluate its institutions. Mere policies to reduce public debt will not be sufficient to restore economic growth. Political mistrust and disaffection will not be solved by passing the access to information law (Ley de Transparencia). But luckily, Spain is a representative democracy combined with social market economy, the two necessary pillars to regain prosperity and stability. In this sense, the basic ingredients are present and the wheel does not need to be reinvented. However, the way is not yet paved for the necessary legal and structural reforms.

Julie Cantalou, European Affairs Manager

[i] http://blogs.elpais.com/metroscopia/2013/06/barometro-electoral-junio-2013.html

[ii] The two major corruption cases of the past years, the “Gürtel” case and the “Bárcenas” case, both involving politicians from the ruling Partido Popular, combine these elements of illegal party financing, bribery of local and national government officials, tax evasion and the construction boom of the years 2000’.

[iii] http://www.access-info.org/en/spain. The same study has also shown that the courts are challenged by a lack of sufficient resources to cope with their high workload.

[iv] http://www.transparency.org/country#ESP

[v] http://www.fbbva.es/TLFU/dat/Presentacionvalueswordwidel.pdf

[vi] http://ec.europa.eu/public_opinion/archives/eb/eb78/eb78_es_es_nat.pdf

[vii] http://fnf-europe.org/2012/11/16/dialogue-programme-european-integration-dieter-nohlen-in-barcelona/

[viii] http://blogs.elpais.com/metroscopia/2013/06/barometro-electoral-junio-2013.html

[ix] http://www.aldeparty.eu/en/news/iberian-liberals-meet-vigo-spain

[x] http://www.fbbva.es/TLFU/dat/Presentacionvalueswordwidel.pdf and http://ec.europa.eu/public_opinion/archives/eb/eb78/eb78_es_es_nat.pdf

[xi] The “sovereignist“ parties are those in favour of more self-government or the independence of Catalonia.

[xii] Catalonia surrendered to the Spanish and French Bourbon army after Barcelona being taken on the 11 September 1714 during the war of the Spanish Succession. It lost its independence after the introduction of a new centralized state structure by the king Felipe V.

[xiii] „Small is beautiful“, article published by Robert J. Barro in the Wall Street Journal on 11.10.1991

[xiv] “Cuándo se torcieron las cosas?: tres hipótesis”, published on 4 April 2013, http://www.fedeablogs.net/economia/?p=29695