A year after an insolvent European continent realized it is long overdue to implement fiscal consolidation, aka tightening, also known as 2010's keyword of choice: "austerity", the political regimes who have supported fiscal prudence are one after another falling victim to the general population's dissatisfaction with the gradual elimination of a myriad of socialist policies. Following recent electoral losses in Germany, not to mention the overthrow of the Portuguese government, which like Belgium, continues to be in limbo, today we move on to the second to last domino in the PIIGS chain: Spain (and Italy is next: S&P took the time at 6pm on Saturday to remind everyone about that particular unpleasant fact). Per Reuters: "Spaniards began voting on Sunday in local and regional polls expected to deal heavy losses to the ruling Socialists, who are blamed for widespread unemployment that has off a wave of pre-election protests. Tens of thousands of Spaniards demonstrated in the past week in city squares around the country against austerity measures that have kept a fiscal crisis at bay but aggravated the highest jobless rate in the European Union. [as a reminder a webcam of the Madrid protests can be found here]. The protesters have called on Spaniards to reject the Socialists and the center-right Popular Party, the main two political options in Spain." The problem is that when you overthrow socialists, it is unlikely that you will get more socialism down the road. Which, however, is what everyone in this country of 21% unemployment, and nearly 50% joblessness in the 18-25 age group really wants.
More from Reuters:
Polls show the Socialists could lose strongholds such as the Castilla-La Mancha region, where they have controlled the regional legislature for decades, and the city of Sevilla, where they have been in power for 12 years.
If forecasts hold true, the outcome will be a rebuke for Prime Minister Jose Luis Rodriguez Zapatero, applauded abroad for his fiscal discipline during the euro zone crisis but unpopular at home as the economy stagnates.
The Socialists, in power since 2004, are also looking likely to lose the next general election, which is scheduled for March 2012, but could come earlier if big losses on Sunday spark a leadership crisis within the party.
After the euro zone debt crisis forced Greece, and later Ireland and Portugal, to take bailouts, Zapatero implemented round of measures to tackle a huge public deficit and persuade financial markets that it has the budget under control.
He is expected to maintain unpopular economic policies whatever the outcome on Sunday.
"Unless the government wants to run the risk of another episode of financial distress and the debt spreads sky rocketing again, it will have to implement another austerity package before the next elections," Fernando Fernandez, an analyst at Madrid's IE business school, said.
In the past Spain has been relatively timid and accepting, even as its economy has continued to contract, and as the threat of the Cajas true debt exposure is finally put to the table (first discussed on Zero Hedge in July 2010). Those days are over.
Until now Spaniards had been remarkably patient with the economic crisis, as joblessness has been cushioned by traditionally strong family ties and by under-the-table work. But the patience seemed to run out this week.
"We need a change and I'm not surprised people have risen up, albeit belatedly," said one of the protesters, 38-year-old Robert, who works for an advertising production company.
Robert had brought along his three-month-old daughter "so she can start learning young," he said.
At the end of the day, the only thing that matters is what the bond vigilantes says. Should the socialists be swept and be replaced with a far more anti-austere party today, then one can be certain that the Spanish €3.5 billion auction of 3 Years on June 2 will be the worst of the lot, and that breakout in Spanish yields predicted by Goldman, is about to set off a firestorm of selling pushing Spain into the vigilante blender.