Populism is top enemy of reforms: Spanish Economy Minister

The biggest bar to implementing necessary structural reforms is the rise in political populism in Europe and the U.S., the Spanish economy minister said on Thursday.

"These are not easy times for governments globally all over the world," Luis de Guindos said at a panel discussion at the International Monetary Fund (IMF) hosted by CNBC on Thursday.

"The biggest challenge and the biggest enemy of structural reform is populism and populism is pervasive now. Even in the (United) States, I have realized you have a little bit of populism now," he later added.

Police break up skirmishes between demonstrators and supporters of Republican presidential candidate Donald Trump
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Police break up skirmishes between demonstrators and supporters of Republican presidential candidate Donald Trump

De Guindos has served as economy minister since Mariano Rajoy's center-right government took power at the end of 2011. Shortly afterwards, the country requested international aid for its banks, which were crippled by piles of non-performing real estate loans.

Spain received a loan of around $100 billion for its lenders, which de Guindos helped negotiate, as well as helping push through reforms of the country's banks and labor markets.

The Spanish economy returned to growth at the start of 2014, having exited its bailout at the start of the year. The economy accelerated further in 2015 to grow by 3.2 percent.

De Guindos said Spain's experience showed it was best to make reforms as soon as possible and that "the first reforms you have to implement are the hardest ones."

At the panel discussion in Washington D.C., IMF Deputy Managing Director Min Zhu added: "We observe in Europe that people more and more realize that structural reform is a must."

The rise in protest parties brought an end to Spain's traditional bi-party system in its elections in December 2015. Rajoy's People's Party won the most votes, but failed to gain an absolute majority, while the upstart anti-austerity party, Podemos, came a close third to the Socialist Workers' Party.

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De Guindos said the ascent of populism in Spain and elsewhere meant it was harder for parties to win absolute majorities in elections.

The radical-left Syriza Party took power in Greece in 2015 with an anti-austerity platform. New protest parties and political figures of the left and right have gained support in other European countries, including the U.K., Germany and Iceland.

In the U.S., Bernie Sanders and Donald Trump have whipped support away from the mainstream Democratic Party and Republican Party candidates and Trump could yet become the GOP's presidential nominee.

At the panel discussion, Diana Farrell, CEO of the JPMorgan Chase Institute, said political populism corroded the ability of government and regulators to have an "ongoing dialogue" with business and industry.

"If you create a populist environment… You are going to get regulations that are actually more crippling to the economy," she said on Thursday.

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