Italy and Spain: a tale of two countries

The Elcano Royal Institute is a think-tank for international and strategic studies that analyses world events and trends from a Spanish, European and global perspective.

The Elcano Royal Institute's Expert Comments are 1,000- to 1,500 word pieces produced by the Elcano Royal Institute's analysts as an immediate response to international events relevant to Spain.
The outcome of Italy's constitutional referendum on 4 December caused much nervousness in the markets and renewed concerns about the future of the EU. A number of analysts predicted a continental cataclysm if Prime Minister Matteo Renzi were to fail in his attempt to implement a set of reforms that ultimately would reduce the powers of the Senate and grant the Government much more power and freedom of manoeuvre to tackle Italy’s main structural challenges: the troubles with the Italian banking sector, the rise of Beppe Grillo’s Five Star Movement and the real risk of permanent political and economic stagnation.

In the other side, Spain seems to be following a different course. Despite the Spanish Popular Party not having an absolute majority in Parliament, the former Prime Minister Mariano Rajoy managed to be invested for a second term and formed a new Government, relying on concrete agreements with other parties to achieve much-needed stability for the country. Good macro indicators support Rajoy’s position: GDP is forecast to achieve a remarkable 3.2% growth in 2016, the unemployment rate is still high but declining steadily, consumption has improved and exports are consistently beating expectations.