Spain's Rajoy gets mixed message in regional votes

Rajoy may try to spin Sunday’s elections results as evidence of support for his austerity policies, but the results portend political disaster for the mainstream left and right parties.

The prime minister’s words with some spin by a right-wing, Spanish pundit:

He said the election in Galicia “was interpreted by everyone as a test for his policies. This represents popular backing for those policies.”

The Popular People’s Party (PPP) did win elections in Galicia, Rajoy’s home province. To place these results in context, national politicians almost always win home elections.

Here is a map of the 1984 U.S. presidential election. Guess which state the loser, Walter Mondale, is from:

{view map here: http://dareconomics.wordpress.com/2012/10/22/rajoy-losing-support-as-spains-falls-apart/}

(Hint: it’s the blue one all by itself in the middle) American presidential candidates almost always have won their home states, defined as the state where they last held office. In recent history, only Al “Lockbox” Gore managed to lose his home state of Tennessee.

Rajoy’s victory in Galicia does not tell us much, but his loss in the Basque region speaks volumes of the political situation in Spain. Both the PPP and the Socialists lost seats in the elections, and a separatist, nationalist coalition will form a government.

This is a similar result to what polls indicate will occur in Catalunya. Both of these regions pay more in tax revenues to the central government than they receive. Mix in long-simmering ethnic tensions with the resentment over taxation and spending, and you have the recipe for the dissolution of a sate.

Two regions with separatist aspirations do not bode well for the future of a unified Spain, and there is little that the central government can do about it. If regions vote to secede, a civil war could erupt. Who is paying for this civil war? Spain cannot borrow money on its own. Will the ECB continue the OMT policy to finance the Spanish military to wage a campaign to maintain unification?

Perhaps the eurozone will manage to stay together, but ironically the price to pay may very well be the internal breakup of some of its members.

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