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An insider’s view on the City of London and beyond

An oasis of stability amidst the populism

The Spanish exception

Political upheaval stalks the West. Holland went to the polls in March and the far-right party of Geert Wilders came in second place. Marine Le Pen looks likely to win the first round of the French presidential elections in April. The US voted for Trump and Britain voted for Brexit. Yet cast your eyes south to a country with 42% youth unemployment, two inconclusive elections, almost a year without an elected government, and discover an oasis of stability.

“Spain is different!” Napoleon was reported to have exclaimed after his troop’s first defeat on Spanish territory in 1808 following a remorseless string of successes elsewhere.

Spain now boasts the same conservative Prime Minister, Mariano Rajoy, and the same Economics Minister, Luis de Guindos, as in 2012 when the Partido Popular came to power.

Protest party Podemos has lost its puff, while the traditional opposition socialist party is leaderless and beset by infighting, forced to abstain from voting against a minority conservative government for fear of new elections at which it would likely lose more votes. At a time when the UK Conservative Party and the US Republican Party espouse policies their predecessors would not recognise, the Partido Popular administration stands by the labour law reforms from its last stint in government. There is even a whiff of hope around the Catalan question, as the government privately and publicly dialogues with local politicians.

Meanwhile, the UK’s loss of influence in the EU has moved Spain into a more central, influential position. At the mini-EU summit in Versailles earlier this month, Mariano Rajoy was very visible in the company of Germany’s Angela Merkel, the French President and the Italian Prime Minister.

The answer to why Spain has evaded a major upset is complex – and like recipes for paella, everyone has a different one. “We are too poor to indulge in a Brexit-like bit of populism,” states a Spanish diplomat friend. “Only a wealthy country like the UK can afford to do so.”

‘Poor’ is an exaggeration, but what is true is that the years of scarcity are not as far back in Spain’s collective memory as that of other European neighbours. Spain’s per capita nominal GDP is $28,115. The UK’s is $39,530. For the US this is $56,115.

Evidence of what populism means in practice is also cited as a reason. Podemos, with its pony-tailed, jeans-clad leader, reached the apogee of its support a couple of years ago. It then suffered the shock of actually making it into some local and city governments, proving to be incompetent and unable to fulfil any of its promises. The party’s connections with Venezuela came to light as did other revelations of corruption, all leading to disappointing results for them in the last general elections.

Additionally, the populace has not reacted to large scale immigration or terrorist attacks with xenophobia and anti-Muslim sentiment. Partly, easily integrated Latin Americans make up the vast majority of the 10% of the total population who are immigrants. Yet there are also an estimated one million Moroccans in Spain. It is a tolerant society.

Spain’s home ownership rates provide another clue, says a Spanish bank chairman. A substantial 78% of Spaniards own their own home, even after one of the deepest recessions in the EU. It is 22% lower for the UK, the US and France. And almost half of the population own their homes outright, without a mortgage, compared to 34% in the UK. Despite headline-grabbing statistics like 18% unemployment, the Spanish middle class has a larger stake in political stability.

In fact, the economy is progressing solidly, with 3.2% GDP growth last year and forecasts of up to 2.7% in 2017 on the back of a rebound in private consumption, exports, and investment, aided by past reforms, according to the IMF. Tourism has reached record highs as the list of sunny competitor countries that are also safe becomes ever smaller.

Although the Spanish phrase “mal de muchos, consuelo de tontos” (only a fool takes comfort from the misfortune of others) comes to mind, Madrid also hopes to take advantage of Brexit to poach some City jobs. It has put on an impressive turn of speed. The financial markets regulatory authority, the CNMV, guarantees foreign companies a fast-track pre-authorisation process in two weeks and authorisation in two months. The simple pre-authorisation form is on the website and, like all company documentation, can be submitted in English. An English-speaking coach is appointed to guide each firm through the process.

For expats, it doesn’t get much better than living in small city where you can easily drop off your children at any number of international schools before work, walk to the office, have a light lunch of fresh, grilled gambas in one of the many outdoor restaurants even in March, and from May enjoy a game of evening golf or savour the array of cultural activities in endless sunshine. For Spaniards only stay at home when they are ill. Seriously ill. Life-threateningly ill.

Madrileños, in the words of a foreign CEO “combine the rigour of the Germans with the creativity of the latins.” That is certainly a reason why Madrid is the 2nd region in the EU for technology created employment: 220,000 professionals working in high-tech industrial and services sectors.

In truth, calling a country with a minority government dependent on the abstention of its rivals an oasis of stability, may seem an exaggeration. But in our topsy turvy world, what matters is relative stability, not absolute stability. And whatever happens on the political front, I would always vouch for Spain’s welcome of foreigners – be they tourists, immigrants or displaced bankers.

catherine phelps