Whether or not the conference proves to be important, Mr Zapatero is right that he deserves to be there. Spain is the world’s ninth-largest economy at market exchange rates, or twelfth when measured by purchasing power (making it bigger than Canada, a G8 member). It is the world’s seventh-biggest foreign investor. It has two of the 20 biggest banks, and it has made a good job of regulating its banking system. Like the United States, Britain and Ireland, Spain has seen a runaway housing boom turn to bust over the past year. Unlike them, none of its banks has yet had to be bailed out. Indeed, Banco Santander has been shovelling up banking roadkill in Britain and the United States.
So Spain has something to say in any discussion about global finance. Its non-invitation may owe something to Mr Bush’s puerile sulk at Mr Zapatero over his abrupt withdrawal of troops from Iraq in 2004. But if Spain is too easily overlooked, it is partly Mr Zapatero’s fault. He is one of Europe’s few successful politicians of the left. Underestimated by his opponents at home, he was re-elected to a second term earlier this year. But he has shown little interest in the world beyond Spain. In this parochialism he faithfully represents a country where decentralisation has brought benefits but narrowed political horizons. That does not reduce its potential cost.
La cuenta, señoresIn the three decades since it emerged from dictatorship Spain has become one of the world’s success stories. It has turned into a robust democracy and a tolerant society. Until recently it was creating one of every three new jobs in the euro area. But too many of those jobs involved building more than a third of all the new houses started each year in the euro zone. The housing bust at home, as much as the financial turmoil abroad, has sent Spain skidding towards recession. For an economy that has been growing at close to 4% a year for a decade, this is a painful experience. Already this year unemployment has shot up by 750,000 to 2.8m, or 12.3% of the workforce.
After initially downplaying it, Mr Zapatero has responded reasonably effectively to the slowdown. The government has announced measures to inject liquidity; the unemployed will be able to postpone part of their mortgage payments. But the test will be whether the prime minister takes the steps needed to make the recession as short and mild as possible. These include structural reforms, especially of the labour market, to address Spain’s growing loss of competitiveness—it is no longer a cheap place to do business, and its workers are not especially productive. He may also have to claw back money and regulatory power from the regional governments. That is not easy, since the electoral system gives exaggerated weight to Basque and Catalan nationalists. Like some of its predecessors, the government is dependent on their support to pass its budget. And as foreign investment heads elsewhere, Mr Zapatero needs to sell his country more aggressively abroad.
In contrasting ways both of his predecessors, Felipe González and José María Aznar, carved out a role for Spain as an important actor in Europe and as a bridge to the Americas. History may judge that Mr Zapatero was right to oppose the war in Iraq. But under him and his foreign minister, Miguel Angel Moratinos, Spain’s foreign policy has resembled the pleadings of an NGO rather than the cool-headed pursuit of national interest by a country which wants to be treated as a world leader. In his first term, Mr Zapatero’s main initiative was a worthy but nebulous “Alliance of Civilisations”. In his second term he has set as a goal the worldwide abolition of the death penalty.
Mr Zapatero has proved himself a skilled political tactician. But he has shown no willingness to lead his Socialist Party out of its politically correct comfort zone. If Spain’s remarkable success is not now to be followed by stagnation and limited international relevance, he will have to do so.