Could Spain be turning into another Brazil?

The political scene of Spain, European Union (EU)’s 5th largest economy, has plunged into its worst crisis in 3 decades as elected politicians have yet to shape a majority that would reflect the close results of the December 2015 general election. The next Prime Minister must garner enough votes in the 350-seat Congress of Deputies if he/she wants to succeed Mariano Rajoy of the conservative People’s Party (PP) who’s been in office since 2011.

The issue is that in addition to the PP which got 28.7% of the votes, Pedro Sanchez’s PSOE and Pablo Iglesias’s Podemos got 22% and 20.7% respectively, enough to prevent the emergence of any parliamentary majority as long as they disagree on major issues though they both belong to the left.

The unexpected success of social-liberal Albert Rivera’s Ciudadanos at 13.9% participates in the absence of political transition which, if there were no consensus by May 2, 2016, could lead to a new election. Rajoy is, to a minor extent like Brazil’s President Dilma Rousseff, locked into alleged scandals, mainly on accusations of illegal political financing – the Barcenas affair. Judicial affairs could therefore exclude Rajoy from the political game prematurely, leaving Spain into a quite shaky political future.

If the political deadlock raised Spain’s debt cost – 10-year debt is 10 basis points above Italy’s – the Spanish economy differs from Brazil’s with a 3.2% GDP growth in 2015 and a 2.8% forecast for 2016. Unemployment decreased 2.2 points of percentage at 22.3% in 2015 and should continue down this path, according to EU statistics.

However there is growing fear that disturbed politics and growing underground economy as a result could discontinue Spain’s long way towards sound economic recovery. The only consensus here is that Spain would likely undergo Brazil-like hardship if didn’t belong to the euro area, this time a guarantee of some stability.