In the wake of New Zealand’s first MMP election we were without a central government for several weeks. When it became clear the sky was not falling in without a government to hold it up, the then-leading business daily published a headline: “The Libertarianz were right all along.”
With an even longer experiment, Spaniards are discovering something similar: that Spain’s economy is expanding robustly without a government:
Spain has been without a full-fledged government since December. Doubts about who will form the next one have persisted since the divided parliament elected that month failed to install a prime minister and was dissolved. A newparliament, elected in June, is also deadlocked among four major parties, none close to a majority.
Mariano Rajoy, the conservative leader who was elected during the recession in 2011 and has overseen three years of recovery, remains in office as acting prime minister but with no power to propose legislation or spend on new projects. Parliament next week is expected to reject his bid for a second term, as head of a minority government, creating the possibility of yet another general election.
Meanwhile, out in the real world away from the Spanish ‘beltway’ and unencumbered by the otherwise regular torrent of new legislation or spending on political projects,
The eurozone’s fourth-largest economy is on track to expand around 3% this year, outpacing the International Monetary Fund’s projections for France, Germany and the U.S.
So now matter how bad a country’s rules and regulations are, seems that simply removing the uncertainty of changes in all those rules and regulations is enough on its own to give an economic system a boost.
It’s the flip side of regime uncertainty.