European eyes will turn anxiously toward Spain on Sunday. At the end of a turbulent year that saw a far left government take office in Greece and a left-wing coalition backed by communists empowered in Portugal, Spanish voters will go to the polls on Sunday to pass their verdict on four years of conservative government under Prime Minister Mariano Rajoy, who has led Spain through a period of extraordinary economic hardship following the country’s banking bust and now into recovery. Even before a vote is cast, the election promises to take Spain into uncharted waters. The old two-party system that has dominated the political landscape since the end of dictatorship in 1975 is being challenged by not one but two newly-arrived populist parties: the far left Podemos, a close ally of Greece’s Syriza party, and the centrist Ciudadanos, or “Citizens”.
Ciudadanos was originally established in Barcelona to oppose the campaign for Catalonian independence but its blend of economic and social liberalism is popular with voters who blame the cronyism and corruption of the two traditional parties for bringing Spain to its knees.
Polls published at the weekend—the last allowed by law ahead of the election—show the contest on a knife-edge. Mr. Rajoy’s Popular Party is clearly ahead at around 27%, but not by enough to win an outright majority. The other parties are bunched between 18% and 21%. That suggests Spain is heading for a minority or coalition government, assuming any government can emerge at all from the mess.
What impact might this have on Spain’s economic recovery? There is little doubt that what investors crave above all is political stability. Mr. Rajoy may be an uninspiring politician and critics say he squandered a golden opportunity when blessed with a large majority to deliver root and branch pro-market reform to Spain’s social model and public administration.