It does not really matter who wins the elections in Spain, the economic realities facing the country leave very little room for practical policy differences. They must cut debt and spending, while boosting economic growth and job creation.
Mariano Roy Rajoy, the candidate for the centre right Popular Party, is expected to defeat Alfredo Perez Rubalcaba, of the ruling socialists. If Rajoy gets the prime minister's job, he has an unenviable task ahead of him.
Markets remain nervous about the state of Spanish finances, pushing up the interest which the country has to pay on its loans. Its 10-year bonds are already hitting an unsustainable seven per cent. This necessitates severe cuts in government spending, to reduce debt to more manageable levels and calm the markets. However, state spending cuts are likely to prove to be a drag on economic growth and job creation, without which Spain will not be able to get its finances in order in a sustainable manner. And, budget cuts, especially on social services, are an invitation for a popular political backlash which would make it difficult for Rajoy to stick with a reform programme.
Despite this, his best bet is to win the confidence of the markets to get the time and money he will need to save Spain.
