Mariano Rajoy is gone from Spain’s political scene. And good riddance. Live by the sword die by the ballot box. Catalan and Basque separatists took their revenge on Rajoy’s brutal crackdown on last year’s Catalan independence movement by voting with the Socialists and Podemos to oust Rajoy from power.
The political situation in Spain has been complicated for nearly two years now as Rajoy governed with a very weak, cartel-style coalition. It was cobbled together under duress and pressure from the European Union to not allow anti-austerity party, Podemos to take power and prevent Catalan independence.
That was Friday. Today the new government in Catalonia was sworn in and it looks to be just as set on seceding from Spain as the last one was. The difference now is that EU-firster, Rajoy, is no longer in power.
The leader of the Socialist party, Pedro Sanchez, has vowed to discuss Catalonia’s situation “government to government” which is a radical change from Rajoy’s refusal to even countenance a dialog with former Catalan leader Carles Puidgemont, who is in Germany out on bond after being arrested by German authorities at Rajoy’s request.
Now, Spain’s political future is up in the air and at a time when hard-core populists in Italy are determined to either tear down its relationship with the EU or force it to reform bodily.
Matteo Salvini is preparing to oust thousands of refugees. Italian politicians are calling for Germany to leave the euro, going on the offensive against German rule over the rest of Europe. And now, Spain’s Socialists are trying to put together a weak, minority government which thumbs its nose at Podemos after using its support to get rid of Rajoy and take power.
Sanchez is trying to go it alone with support of around 20% of Spanish voters in putting together a cabinet. He’s doing this to keep Brussels from lashing out at involving Podemos in the mix who will push to undo fiscal austerity policies demanded by the Troika — EU, ECB and IMF.
But, it’s also obvious he’s willing to repay the separatists for their support. And in this way keep everyone honest. Brussels can’t push him too hard because he’ll simply allow the Catalans to go forth with their independence drive again this fall while also throwing domestic opponents a bone by loosening austerity policies.
Debt Bomb, Debt Bomb
As I’ve been saying for weeks now in relations to Italy, Brussels has almost zero leverage at this point in dealing with populist movements in Souther Europe. None other than J. P. Morgan finally came out and admitted that this time, unlike with Greece in 2015, is truly different.
Long story short, Italy has very few options for improving its situation by staying in the euro. In fact, all of its incentives thanks to a strong current account surplus and discharging...