Spain’s recovery is clouded by politics. Mariano Rajoy has achieved a lot in the two years that he has been prime minister. Growth has finally returned; even unemployment is falling. But as Spain enters a new electoral cycle, the appetite for reform is waning. What’s more, there is a big question mark about what will happen after the next election, which has to be held by March 2016.
A lot is riding on the cleanup of euro zone lenders being overseen by the European Central Bank. The progress so far is encouraging. But clarity is needed on a few points to ensure that lenders really do get a good scrubbing and are therefore able to support the zone’s fragile economic recovery.
The hot phase of euro crisis may be over. But the zone will limp on for years with low growth and high unemployment unless further action is taken on three fronts: bank balance sheets must be cleaned up, monetary policy loosened and more free-market reforms adopted.
Italy seems continually condemned to disappoint. The economy has barely grown in 20 years. The younger generation is languishing without opportunity: youth unemployment stands at 41 percent. So many chances to reform the country have been wasted – and many by Silvio Berlusconi, who was finally expelled from the Senate last week after being convicted of tax fraud.
Greece’s reform job is not even half finished. The government hasn’t done enough to root out the vested interests that strangle the economy. Nor has it cracked down fully on tax evasion or pushed hard enough to privatise state-owned properties.