As Spain’s Economy Booms, Its Government Keeps Slowing Down

(Bloomberg) -- Spain's government is having a hard time keeping up with the booming economy.

The work of government is moving at a snail's pace, with the parliament in Madrid only approving four laws so far this year. Two made tweaks to the justice system, one laid out rules for returning stolen art and another approved the 2017 budget after a yearlong delay.

This year's muted parliamentary activity highlights the weakness of the minority administration led by Mariano Rajoy as it struggles to get things done.

With the economy set to grow more than 3 percent in 2017 for the third year in a row, Spain is missing out an opportunity to make reforms that would bolster its performance for years to come, said Angel Talavera, an economist at Oxford Economics in London.

“Right now the economy is ignoring the politics,” Talavera said by phone.  “This would be the right time to tackle structural issues and build up buffers. It's a wasted opportunity.”

The government has also issued 13 decrees up to June including steps to help home owners overcharged for their mortgages and rules for employment in ports. That's a far cry from 2012 as Rajoy was trying to steer Spain through a banking and economic crisis in his first full year in office.

That year, the administration used its large majority at the time to approve 17 laws and 29 decrees including sweeping steps to make Spain's labor market more flexible, a restructuring of the banking sector, and an austerity budget.

While more government does not necessarily translate into benefits for the economy, the decline in activity highlights the diminished clout of Rajoy's government. Meanwhile, organizations such as the International Monetary Fund keep urging him to take further steps to improve growth potential by doing more to tackle unemployment and foster productivity.

“There has been very little accomplished in terms of tax reform, pensions, regional financing, and I don't expect any progress on this,” said Talavera. “The fragmented political scenario makes it difficult to reach broad cross-party consensus.”

To contact the author of this story: Maria Tadeo in Madrid at mtadeo@bloomberg.net.

To contact the editors responsible for this story: Charles Penty at cpenty@bloomberg.net, Fergal O'Brien Lucy Meakin