It looks like 2013 is going to be another hard year for Mariano Rajoy.
Despite modest signs that his government's draconian austerity program is helping ease Spain's harsh recession, the Spanish prime minister faces a host of challenges in his second year. The economic crisis still has not bottomed out, the threat of secession in Catalonia is growing, Mr. Rajoy's popularity is plummeting, and now a court-led investigation has uncovered a 22 million euro corruption scheme with his Popular Party (PP) that promises to further erode its already fading public support.
"The diagnosis is clear," says Jaime Pastor, political science professor at the Universidad Nacional de Educacion a Distancia and an expert in mass movements. "Rajoy has portrayed himself as the leader who averted a bailout, but instead he is not only facing the territorial challenge of Catalonia, but also infighting from the more radical right wing."
"We are looking at more political and social instability ahead. If investors' trust erodes, if the cost of borrowing increases again, we are looking at a severe political crisis," Dr. Pastor says.
A Hard Road
Rajoy's political woes stem from a grueling economic crisis that began in 2007 when a housing bubble burst, catalyzing a broader recession in every sector that greatly outstripped the state's ability to confront soaring poverty. The central government, as well as regional and municipal governments, turned to credit, and the deficit ballooned to dangerous levels, threatening the broader EU economy.
Rajoy came to office a little over a year ago, after his party swept regional and national elections. The PP won on the national level with a 16 percentage point difference (45 percent to 29 percent) over the runner-up Socialist Party, and with more than enough parliamentary seats to pass any legislation.
But his government has had only limited success in dealing with the debt crisis. Spain's economy contracted for the fifth consecutive year in 2012, by 1.4 percent, and 2013 is forecast to be worse. The ranks of unemployed, which are expected to continue to swell, have already reached 26 percent – the highest in Spain's history – and account for one-third of all jobless Europeans. Meanwhile, evictions continue to skyrocket, and the dramatic social plight is only compounded by unprecedented public spending cuts and tax hikes that have eroded the country's safety net.
Still, there have been modest positive signs. Rajoy has, so far, successfully managed to delay for months what appeared to be an imminent bailout of the Spanish economy, which could yet threaten the European and global economy. His government's draconian austerity measures are showing early positive signs at a macroeconomic level, even if they are far from trickling down, and the market's rates to lend money to Spain have dropped significantly in the past few months.
But even taking into account Spain's economic plight and the backlash that was sure to accompany the government's harsh remedies, Rajoy is still rapidly losing political support, even within his own party, as scandals and a secessionist drive in Catalonia undermine his ability to govern.