Category Archives: Politics

Europe, Politics

Why Spain’s New Coalition Will Struggle to Govern

This article has been republished with permission from our partner, Stratfor. The original version was first published in Stratfor’s WORLDVIEW and can be found here.

HIGHLIGHTS

  • Spain will be governed by an untested coalition that does not control a majority in parliament, which will render the policymaking process more complex and limit the new government’s effectiveness.
  • The Spanish economy is slowing, and a combination of risk factors (from ongoing trade disputes with the United States to unresolved secession disputes with Catalonia) will contribute to even slower growth in 2020.
  • Companies operating in Spain will deal with greater fiscal pressures and a government that will seek to backtrack on some of the labor market reforms that were introduced during the peak of the economic crisis in the early 2010s.

Spain has just appointed its first coalition government since the return of democracy in the late 1970s, but the new government will struggle to pass structural reforms at a time of growing political fragmentation and slowing economic growth. Prime Minister Pedro Sanchez, who won a vote of investiture in parliament on Jan. 7 and will lead a coalition between his center-left Socialist Party (PSOE) and the left-wing Unidas Podemos (UP), will have to deal with a worsening economic environment, a precarious labor market and secession pressure from Catalonia. Companies operating in Spain, for their part, will face higher taxes and the reversal of some of the market-friendly policies that were introduced during the peak of the economic crisis in the early 2010s.

The Big Picture

In recent years Spain’s political system has become more fragmented, general elections have become more frequent and structural reforms have become harder to implement. For the most part, the Spanish economy has been immune to political events, growing nonstop since 2014. But that immunity is ending, and Spain’s new coalition government takes office facing slowing growth, unresolved secession disputes in Catalonia and a precarious labor market.

See Europe section of the 2020 Annual Forecast

A Fragmented Political Landscape

Between the 1980s and early 2010s, Spain had single-party governments led by either the PSOE or the center-right People’s Party. But in recent years, a combination of factors ranging from the economic crisis to corruption scandals led to the emergence of new political parties on the left and the right. As a result, Spanish parliaments have become more fragmented, early elections have become more frequent, and governments have had a harder time implementing policy. This development explains why Sanchez is the first prime minister to lead a coalition government since the end of Gen. Francisco Franco’s dictatorship in the late 1970s.

In a further complication, PSOE and UP do not control the majority of seats in parliament, meaning members of the coalition will have to first agree on policy with each other, and then seek support in parliament on a case-by-case basis. This will open the door to disagreements between the coalition partners and create a complex legislative process wherein the government will need to make concessions to smaller parties in parliament to pass legislation. Policymaking will, therefore, become more complex, slower and subject to constant pitfalls.

This complex political landscape will subject companies operating in Spain to recurrent uncertainty, both about the survival of the government and about future policy. The Spanish Constitution makes it hard for the opposition to oust a government, rendering the chances of a successful no-confidence motion against Sanchez low. However, disputes between the PSOE and UP could lead to the dissolution of their alliance that almost certainly would lead to an early election. At the same time, parliament’s fragmentation may force the government to modify or abandon its policy proposals, making it difficult for businesses to make long-term predictions about the continuity of policy.

Businesses in Spain, particularly in sectors such as banking and energy, probably will face greater fiscal pressure since the new government is expected to try to raise taxes on high earners and large corporations. For example, the PSOE and UP have agreed to introduce a tax on financial services, which will affect Spain’s robust financial sector. PSOE and UP have also agreed to backtrack on some labor reforms introduced during the peak of the economic crisis in 2012 by making it harder for companies to dismiss workers, reducing the use of temporary contracts and giving priority to collective bargaining on salaries instead of company-specific negotiations. Without a parliamentary majority of its own, the PSOE-UP alliance will have to reach out to smaller parties to introduce reforms in taxation and the labor legislation. Center-left parties such as the Republican Left of Catalonia (ERC), Mas Pais and EH Bildu could endorse these reforms, but they will make demands of their own in exchange for their support.

A Slowing Economy

Spain’s economy has largely been immune to the country’s increasing political complexity and uncertainty, growing every year since 2014 thanks to a combination of business-friendly measures introduced by Madrid during the economic crisis and a generalized improvement in the eurozone economy during the late-2010s. But that immunity seems to be over. Most forecasts predict that Spain’s GDP growth will slow in 2020 and 2021. This slowdown is connected to multiple foreign and domestic factors.

Trade disputes between the European Union and the United States will continue in 2020 and take their toll on Spain’s economy. The United States introduced higher tariffs on some Spanish exports such as olive oil and wine in 2019, and the White House could raise tariffs on additional products in 2020, especially if the European Union targets the United States with its own tariff hikes. This move would dent the Spanish economy because the United States is Spain’s main non-EU export destination (roughly 5 percent of Spanish exports go to the United States). In addition, Madrid’s plan to introduce a tax on digital companies (a decision the White House would oppose vehemently) could also prompt the U.S. administration to retaliate with additional tariff hikes.

At the same time, Brexit-related uncertainty will ease during the early months of 2020 but will return by the end of the year. The United Kingdom almost certainly will leave the European Union on Jan. 31 and will remain in the single market until Dec. 31. But should London and Brussels fail to reach a comprehensive trade deal by the end of 2020, and should London refuse to request an extension to remain in the single market, significant disruptions in trade would follow. The United Kingdom is Spain’s fifth-largest export destination (almost 7 percent of Spanish exports go to Britain), while millions of British tourists visit Spain every year. New barriers to trade (such as having to implement World Trade Organization tariffs if the United Kingdom and European Union fail to reach a trade deal by year’s end) would damage Spanish exports, while a weaker pound vis-a-vis the euro would lead to fewer British tourists in Spain — to name only two of the many consequences of weaker EU-U.K. economic ties.

The new Spanish government will also deal with domestic economic problems, particularly connected to the labor market. While Spain’s unemployment rate has been falling fast in recent years, it remains the second-highest in the European Union after Greece’s. Spain also has high rates of youth unemployment (around 30 percent) and a serious problem of long-term unemployment (people who have been out of work for more than a year find it much harder to find jobs than those unemployed for only a few months). Finally, Spain has the European Union’s highest rate of workers under temporary contracts: One employee in four is under a fixed-term contract, twice the EU average. This precarious labor market drags down domestic consumption and investment, which, in turn, undermines economic growth. The PSOE-UP alliance will seek to address these problems through reform in labor legislation, but it will need to persuade like-minded parties in parliament to join the effort, which will not be easy.

Unresolved Catalan Issues

The new Spanish government will also have to deal with Catalonia’s push for independence. The region will not secede from Spain any time soon, but the secession issue will continue to generate friction between Madrid and Barcelona and raise questions about the future of Spain’s territorial integrity.

Sanchez will benefit from the tense relationship between Catalonia’s main pro-independence forces, Together for Catalonia (JxC) and the ERC, which reduces the chances of a coordinated push for secession. JxC and ERC, which compete to be the region’s main political party, advocate different strategies to achieve independence. Some JxC members want to take unilateral measures to secede from Spain, while the ERC favors a more pragmatic strategy that includes dialogue with the central government in Madrid.

Their competition will increase in 2020 because Catalonia probably will hold an early regional election. This vote means that pro-independence parties will not be strong enough or united enough to seriously threaten Spain’s territorial integrity. Moreover, Sanchez’s promise to keep an open dialogue with Catalan secessionists and to improve ties between Madrid and Barcelona suggests that the central government will seek appeasement rather than confrontation to deal with the rebel region.

An important fact remains unchanged. Madrid will not authorize a legally-binding independence referendum in Catalonia, and the region’s pro-independence parties will not stop demanding it.

An important fact remains unchanged. Madrid will not authorize a legally-binding independence referendum in Catalonia, and the region’s pro-independence parties will not stop demanding it.

However, an important fact remains unchanged. Madrid will not authorize a legally-binding independence referendum in Catalonia, and the region’s pro-independence parties will not stop demanding it. The situation of the pro-independence leaders who were jailed after the unilateral declaration of independence in 2017 will also continue to create issues between Madrid and Barcelona.

PSOE and UP have promised to introduce a “fairer” mechanism to distribute state funds among Spain’s autonomous communities and to “reduce the ambiguity” in the policy attributions of the central state and the regional governments, both of which are meant to appease Catalonia. But they will struggle to win enough support in parliament to pass these reforms. As a result, tensions between Madrid and Barcelona probably will not be as extreme as they were in 2017 when Catalonia unilaterally declared independence, but long-term questions about the future of the region will not go away either.

So, while companies operating in Catalonia will see some degree of stability in 2020, their doubts about the future of the region will remain unanswered. Political uncertainty so far has had a modest effect in Catalonia because the region’s economy has grown nonstop since 2014. However, Spain’s National Institute of Statistics recently reported that Catalonia’s regional GDP grew at a rate lagging the average for Spain as a whole in 2017 and 2018. In the meantime, thousands of companies have moved their legal seats out of Catalonia to other Spanish regions since Catalonia’s independence declaration in 2017. While the vast majority of these companies retained operations and workers in Catalonia, the change of legal seat highlights the concern that the independence process has created among businesses in the region.

While Sanchez’s appeasement strategy probably will lead to a decrease of frictions between Madrid and Barcelona, it will create the risk of a nationalist backlash among Spain’s conservative parties. The People’s Party already has announced that it will take to the streets to protest Sanchez’s decision to keep the dialogue with Catalan separatists open, and the right-wing Vox party could do the same.

At the same time, the European Court of Justice recently ruled that ERC leader Oriol Junqueras, who was elected to the European Parliament in May, enjoyed parliamentary immunity when he was sentenced to 13 years in prison in October for his participation in the illegal Catalan independence referendum in 2017. The final decision on whether Junqueras should be released from prison is in the hands of the Spanish Supreme Court, but the European court’s ruling in favor of a convicted Catalan separatist could exacerbate Euroskeptic sentiments in Spain, particularly among Vox voters. Even if Sanchez tries to calm frictions with Catalonia, the situation in the region will continue to be a central element in Spanish politics.

An important fact remains unchanged. Madrid will not authorize a legally-binding independence referendum in Catalonia, and the region’s pro-independence parties will not stop demanding it.

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Latin America, Politics

Venezuela’s Bad Neighborhood

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The last few years in Latin American politics ushered in a wave of political upheavals from Chile to Honduras to Venezuela, and most recently Bolivia. Though the causes that sparked the manifestations differed across the hemisphere, Venezuelan involvement appears to be a common thread in the northern reaches of the continent. In a region that struggles to establish liberal democracies with fully-functioning economies, the socialist government in Caracas has an existential need to avoid isolation. It pursues this objective by destabilizing neighbors it views as ideological rivals and undermining the political opposition in socialist-leaning capitals. The governments of Ecuador and Colombia have both complained directly and repeatedly to the Maduro Administration about its meddling in political protests but their concerns have fallen on deaf ears. Despite crippling inflation and a contested political atmosphere, Caracas continues to see Latin America as a bad neighborhood to be managed.

Regional Problems

The complaints emanating from Colombia and Ecuador are a natural response to apparent Venezuelan meddling in their politics. During popular protests in Ecuador last month against suspension of fuel subsidies, President Lenin Moreno accused his predecessor, exiled former President Rafael Correa, of working with Venezuela to destabilize the Ecuadoran government. Specifically, Moreno accused Correa of “igniting” the protests using Venezuelan and Cuban agitators paid to fuel the protests. Indeed, many of those arrested were in fact, Venezuelan and Cuban, suggesting a more international conspiracy than a fuel-price hike would normally trigger. More ominously, the arrest of 17 Cuban and Venezuelan “spies” caught shadowing and photographing President Moreno’s convoy suggests those countries have a very high-risk tolerance for intervening in the affairs of their neighbors.

Colombia also has its concerns about Maduro’s political meddling. In an explosive speech to the United Nations General Assembly in September, Colombian president Iván Duque denounced Maduro for support to drug trafficking and transnational terrorism. In addition to having similar complaints about Venezuelan nationals sparking violence at protests, Duque was referring to the more sinister threat posed by thinly-veiled Venezuelan government support to ELN and dissident factions of FARC. According to documents leaked from the Bolivarian Intelligence Service (Sebín), and the Operational Strategic Command of the Bolivarian National Armed Forces (CEOFANB), there is a well-known and growing relationship between Venezuela’s armed forces and these groups. Among other things, the documents revealed the Venezuelan military supports the activities of Colombian guerillas it calls “red groups.” Trained by the military, these red groups can be directly integrated with ELN and FARC and can provide intelligence support to Venezuelan military planning for war with Colombia. One document addressed to the Sebín Director of Counterintelligence shows an ELN presence in nearly every state in Venezuela, a force the Colombian military believes to number 2000 guerillas.

Global Linkages Venezuela

Venezuelan meddling in the affairs of its neighbors is almost certainly not a new phenomenon. Maduro’s relationships with other irredentist regimes like Cuba, exacerbate the threat he presents to the region. His relationships with global powers Russia and China are a problem for the United States and therefore tied to issues of global imporance. The deployment of a People’s Liberation Army (Navy) hospital ship to Venezuela in early 2018 and Washington’s reaction to it illustrate this point. As troubling as a PLA(N) presence in the Caribbean may seem to the Pentagon however, Russia has far more robust economic and military interests in the stability of the Maduro regime.

Russian oil companies are a critical factor in preventing the slow collapse of productivity by Venezuela’s state oil company, PDVSA. Long the economic lifeline of the Maduro regime – and the Chavez regime before that – PDVSA’s decline, and Russia’s relationship with it, gives Moscow tremendous leverage over Maduro and his foreign policy. A Venezuela-friendly neighborhood is certainly good for Russia’s military sales program which had been at a low ebb after the April 2016 election of Pedro Pablo Kuczynski (PPK) in Peru and later Ivan Duque in Colombia. In PPK’s case, he set the conditions for corruption investigations associated with previous administrations’ purchase of Mikoyan fighter aircraft, Mil helicopters, and associated support packages. For his part, Duque demonstrated an early willingness to review the peace agreement with FARC, a move that threatened to reduce its influence and that of its Russian sponsor.

Hidden Hand

Apart from Venezuela, Moscow remains a primary supplier of hardware and expertise to Nicaragua and Cuba among others and uses those countries as enablers and staging areas for the conduct of active measures like those affecting Ecuador. According to a white paper released in May 2019,[1] “Russia seeks to undermine the consolidation of the region as a group of pro-U.S. states, and in the process, distract the U.S. and weaken its strategic position in the Western hemisphere.” Russia does this by propping up friendly regimes and manipulating the politics of others as part of its larger strategy.

As U.S. Senator Rick Scott said during an interview for Brazilian newspaper: Folha de S. Paulo, “Russia and China are in all Latin American countries, but not to help. They want to control.” In many ways, this is a replay of conditions seen during the Cold War when the Soviets used proxies to drive wedges between rival governments and indigenous or marginalized political groups. Many of those groups are still notoriously underserved by their governments and represent a tremendous potential for resistance. Venezuela, which exerts influence on all the countries around it, has both the political will to develop this potential and a well-developed capacity to do so. The ability to see Moscow’s hand behind Venezuela’s machinations however is not so clear. For its own reasons, the Maduro regime seems content acting as a Russian enabler in the region if not an outright proxy for Moscow’s interests. How long those roles remain unchanged in the face of Venezuela’s continuing decline is certainly something its neighbors will watch.

[1] Though this white paper, titled: “Russian Strategic Intentions”, is not an official publication of the U.S. Department of Defense, it is signed by the Deputy Commanding General of U.S. Army Training and Doctrine Command and includes chapters written by numerous U.S. Military and Intelligence Community officers writing in their official capacity.

Dino MoraDino Mora is an experienced Intelligence and Security Operations Specialist with a demonstrated history of working in the international affairs industry. His expertise includes Intelligence Analysis/Reporting, Counterintelligence, TESSOC threats, Tactical, operational and strategic Assessment/Planning, Counterinsurgency, Security Training & Team Leadership. He has extensive experience in NATO multinational operations and intelligence operations. Multilingual in Italian, English, and Spanish. He graduated from the Italian Military Academy.

Europe, Politics

Overcoming Democracy: Italy’s Online Experiment

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A political earthquake struck Italy this summer as alliances shifted between bitter rivals in the country’s complicated multiparty system. Power plays, miscalculations and surprise deals made for juicy media headlines, but the most important lesson for the world may lie in the way one particular populist party allows technocrats to substitute technological farce for representative democracy. Though the crisis for government control made global headlines, the internal dynamics are somewhat difficult for outsiders to understand. In his 2015 book The Italians, author John Hopper observed that the turbulent surface of Italian politics may be by design. “[in Italian politics] issues remain arguable, and thus negotiable.” he wrote. “Imprecision is, on the whole, highly prized. Definition and categorization are, by contrast, suspect. For things to remain flexible, they need to be complicated or vague, and preferably both.”

In August, Matteo Salvini of the right-wing League Party created the most recent “turbulent surface” by making moves to bring down the coalition government in hopes he would then win a snap election. Despite his soaring popularity, an unlikely coalition led by the anti-establishment 5-Star Movement thwarted his attempt to gain control. 5-Star and its center-left former rival, the Democratic Party (PD), looked past their differences to freeze Salvini out completely. However temporary, sidelining Salvini and the League was a surprising outcome considering the rise of right-wing parties and leaders in Europe over the past few years. Many of these parties, including Salvini’s, have both overt or revealed links to Russia and its strongman president Vladimir Putin.

The “Non-Party” 5-Star Movement

Far from being a typical political party, the 5-Star Movement is a self-styled “anti-party” group that European journalist Darren Loucaides said “tapped deeply into one of the most powerful forces in Italian politics: disgust with Italian politics. Rather than offer an ideology or platform, Five Star offered a wholesale rebuke of the country’s entrenched, highly paid, careerist political class—left, right, and center.” A grassroots, populist movement, 5-Star emulated the profane style of its famous comedian co-founder, Bepe Grillo, calling some of its early events V-Days, a play on both the 2005 dystopian film “V for Vendetta” and a popular Italian vulgarity. Initially, the five stars in the group’s name referred to its policy priorities: sustainable transportation and development, public water, universal internet access, and environmentalism. Over the past 15 years however, that platform has expanded to include term limits, preventing those with criminal convictions from running for office, and now also a Universal Basic Income concept similar to the one making headlines in the 2020 US Presidential Race thanks to candidate Andrew Yang. Not so flatteringly, 5-Star has also been connected to anti-vaccination laws, the Brexit campaign, and American political operative Steve Bannon.

“When Grillo and Casaleggio founded the 5 Star Movement, few imagined they would reduce democratic freedom by doing so.”

Though Grillo was the public face of the movement for years, the man that truly orchestrated its rise to power was an unknown Italian entrepreneur and political activist named Gianroberto Casaleggio. Casaleggio used Grillo’s fame, straightforward internet blogs, and the Meetup.com platform to create a “grand techno-utopian project…an online voting and debate portal.” Casaleggio hoped to make the elected Italian Parliament obsolete, putting the power to legislate in the hands of the Italian people through their computers and smart devices. As Louciades wrote in Wired, as early as 2001 Casaleggio surmised technology would fundamentally change governments and politics, creating greater transparency and political accountability to the will of the people. He envisioned “interactive leaders” that deal directly with the masses, bypassing the media and its role as an interpreter. In Casaleggio’s view, a natural consequence of cutting out the media middleman would be the “imminent demise of journalism.” Society would be able to see politics as it truly is, not the “virtual reality” the media creates. He did not mince words: “Overcoming representative democracy” he said, “is therefore inevitable.”

Philosophers and Technocrats

Casaleggio named his direct democracy platform after the eighteenth century Enlightenment author and philosopher Jean-Jacques Rousseau and set its launch date for April 13th, 2016. Unfortunately for Casaleggio, he died two days before its debut and would never know how Rousseau became central to the rise of the 5-Star Movement in Italian politics. Rousseau creates democracy without the use of intermediaries or the centuries-old political caste by allowing members to vote for candidates, create referendums on party decisions, propose and debate laws, and participate in fund-raising. As the internet and smart devices make the world ever more interconnected, the potential for these tools to facilitate direct democracy could mean drastic change for governance and politics. An idealist may believe that these systems, when integrated with blockchain or online-banking style security, could empower more voters and bring participation levels to new highs. A skeptic would counter that replacing representative democracy with internet-enabled direct democracy actually creates opportunities for coercion, cybercrime, and consolidation of political power in the hands of a few powerful technocrats.

Ironically, the 5-Star Movement has been roundly criticized for pioneering this technique though it directly contradicts their populist aims. When Grillo and Casaleggio founded the Movement, in part to cut the middlemen out of Italian politics, few imagined they would reduce democratic freedom by doing so. However, with power and information strictly controlled by a small group of technocrats at Milan-based Casaleggio Associates, 5-Star stands accused of silencing dissent. Italian author Silvia Mazzini compared Beppe Grillo to a populist dictator, ushering in new party members then threatening to ostracize or punish them if they do not support his ideas. Despite espousing a desire to empower the common citizen, Casaleggio Associates hand-picks candidates for the Rousseau elections without any transparency whatsoever. There are however, more obvious problems using Rousseau as a mechanism for direct democracy. In July 2019 there were only 100,000 active members on the platform, a tiny fraction of the 10.7 million Italians that voted for the 5-Star Movement in the 2018 general election. These are underwhelming numbers, even in a country where one out of four people still lack access to the internet.

The Future of Online Voting and Direct Democracy

Though access and participation are problematic, security is perhaps a bigger concern. Rousseau suffered several high profile cyber attacks in the run up to elections in 2017 and 2018. Hackers stole members’ information and even published phone numbers and passwords of party leaders in what was probably an attempt to intimidate voters and candidates. In response, the Italian data protection authority fined Casaleggio Associates for failing to fix several security flaws in their system. Italy is hardly the only nation experimenting with risky technology in the democratic process. The Harvard Kennedy School’s Belfer Center released a report that, among other things, concluded “mobile and internet voting technologies are not presently secure enough for large-scale applications. Nevertheless, nations like Ukraine are “moving forward with integrating blockchain-based online voting into their national election systems in efforts to increase security and prevent voter fraud.”

Italy is the first large western republic to utilize an internet-based technological platform that purports to expand democracy on a national scale. As other republics around the world grapple with new wave populism featuring interactive leaders that use social media to bypass traditional filters, the integrity of democratic voting processes becomes a paramount concern. Italy’s ongoing experiment with Rousseau demonstrates that the security vulnerabilities of online platforms and limitations on participation, access, and transparency inherent in these technologies can make some voters more equal than others. The world will do well to look deeper and decide if this is truly an expansion of democracy or actually, as Gianroberto Casaleggio predicted, “democracy overcome.”

Wilhelm JaredJared Wilhelm is a Foreign Area Officer and former Naval Aviator who lives in Italy. He is a member of the Military Writer’s Guild, was named a 2014 Olmsted Scholar, and is a graduate of the U.S. Naval Academy, U.S. Naval Postgraduate School, and the U.S. Naval War College. His views are his own and do not represent the views or position of any other entity. He has previously published numerous articles on democracy around the world, including Some More Equal than Others.