It was widely believed that Spain had resolved its political crisis when prime minister Mariano Rajoy's government was finally voted in, thanks to the abstention of most socialist members of parliament. Spain, after a year, had a government. But it must be remembered that it is a minority government and of course the new coalition government has some harsh policies it needs to push through.

Rajoy will propose tax increases on alcohol, tobacco and sugared drinks as well as eliminating corporate tax breaks, the latest of a long line of austerity measures which the opposition is likely to resist. Spain needs to trim the deficit to 3.1 per cent of economic output in 2017, as agreed with the EU, from an expected 4.6 per cent this year, to avoid fines or a freeze on funds it receives.

So, Rajoy faces a battle and it will be a big battle. The socialists are going to make life difficult for Rajoy because they also want the minimum wage to be raised. The Spanish economy is recovering after the long recession but unemployment is still at record high levels and the prime minister has promised to tackle this issue urgently. Rajoy will need to be both a prime minister and a diplomat. He can't afford to make too many enemies in opposition parties because he risks a backlash which could mean that his government will be defeated in parliament on a number of key issues. The political crisis is far from over.


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