SPAIN ON THE BRINK OF RECOVERY?

Spain has become a giant laboratory for an experiment never before attempted in a modern democracy. Can a program of austerity and structural overhauls extricate an economy from a debt crisis? Is it really possible for a country to achieve a so-called internal devaluation—restoring its competitiveness by cutting wages and boosting productivity rather than lowering its external exchange rate? Are European democracies capable of confronting vested interests and coping with the resulting social upheaval?

Until now, the small group of believers—mostly to be found in Berlin—have been widely dismissed as freaks or sadists. The conventional wisdom argued that the only possible escape for countries like Spain was a large-scale mutualization of euro-zone sovereign debt or to quit the single currency.

The government of Mariano Rajoy has, however—through necessity as much as conviction—set out to prove them wrong.

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