Following Alex Tsipras’ humiliating capitulation to the Troika this Monday, one can imagine governments across Europe breathing a collective sigh of relief, tinged no doubt with a little schadenfreude. The loudest sigh was probably not in Berlin, as one might suspect, but in Madrid where the scandal-tarnished Rajoy government arguably had most to lose from a Syriza triumph (or even half-triumph), with general elections lurking just around the corner.

As the former Greek finance minister Yanis Varoufakis just admitted to the New Statesman, he and Tspiras chronically underestimated the strength of opposition to a new Greek debt deal among the governments of fellow peripheral nations Portugal, Spain, Italy and Ireland.

“The greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”. “Were we to succeed in negotiating a better deal that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.”

Unlike Syriza, Spain’s government has happily danced to the Troika’s tune throughout its tenure. The result, according to Spain’s Premier Mariano Rajoy, has been an unprecedented economic turnaround – one which, in the words of his Minister of Finance and Public Administration, Cristobal Montoro, should serve as an example to the world.

On paper Rajoy and Montoro may have a point. Spain’s economy does indeed appear to be firing on all cylinders. In its latest quarterly economic outlook, the Spanish bank BBVA revised upward its GDP growth forecast for Spain from 2.7% to 3% in 2015. This is no mean achievement for an economy that just three years ago was in the deepest throes of recession.

An Economic Fairy Tale

There is just one problem with this storyline – GDP growth in Spain, as elsewhere, tells only part of the story, albeit an important one. While almost everyone (economists, journalists, eurocrats, Troikaytes and even many Spanish citizens) desperately clings to the dream that the worst is over, they wilfully ignore one niggling fact — namely, that the government’s version of events is riddled with gaping holes:

“Many Little Greeces.” Since Rajoy won the last elections in November, 2011, Spain’s public debt has grown at a faster rate than any time in its post-Franco history. A staggering €590 billion – the equivalent of 30 percentage points – have been added to the country’s total debt during the last three and a half years of government-imposed “austerity.”

Government spending at the regional level continues to spiral out of control. In the last year alone, the regional governments took on 27 billion dollars more debt, ending 2014 with a total combined debt of €236bn – equivalent to 22.4% of GDP. As El Economista warns, Spain consists of many little Greeces. Matters are hardly helped by the fact that the worst regions are also the hottest beds of corruption. They include Valencia, home to Spain’s most corrupt regional government which just suffered the ignominy of being the first Spanish region to be fined by Brussels for “manipulating its own budget”.

A Ballooning Deficit. With general elections fast approaching, Rajoy is on a mission: to buy as many votes as quickly as possible. Austerity has been suspended and spending is on the rise at both the local and national level while tax cuts previously slated for early next year have been brought forward. In exemplary political desperation, the government has even reinstalled part of the extra salary payments civil servants enjoyed during the pre-crisis years of plenty.

Chronic Unemployment. “How can they possibly call this a recovery when more than one in five people are still unemployed?” the financial director of a large utility recently asked me. As if to answer his own question, he added: “It’s a farce, an insult to the lowest intelligence.” As I recently reported, recovery-blessed Spain, not depression-hit Greece, currently boasts the three most unemployed regions in Europe. It is also the OECD member with the highest unemployment rate among the under-25s and the over-55s — once again, higher than Greece! In other words, Spain’s so-called recovery is the economic equivalent of Tacitus’ indelible line: “They make a desert and call it peace.”

A New Bank Bailout. Despite passing repeated ECB stress tests, Spain’s biggest banks, like most of Europe’s biggest banks, remain chronically undercapitalized. They are also home to massive and growing pools of festering debt. Recent estimates have put non-performing loans (NPLs) in Spain at around 9% to 10% of total bank credit – the equivalent, according to analysis by the Wall Street Journal, of approximately €120 billion. As I reported in It’s Getting Ugly in Spain, while the IMF seems outwardly happy for Rajoy & Co to lure unsuspecting voters with the promise of across-the-board tax cuts, behind the scenes it is quietly preparing the groundwork for a new bank bailout – not just in Spain, but also in Italy.

Contagion from South America. Spain is by far the most exposed economy in the world to South America, a region that is slowing down. The region is the primary (if not sole) profit source of many of Spain’s biggest companies. Whereas HSBC, the world’s local bank, is withdrawing from the region as fast as it can pack its bags, Spain’s two biggest banks, Santander and BBVA, are doubling down on their bets. In September, if the Federal Reserve does the unthinkable – i.e. raise interests rates – it could well set off the mother of all capital outflows from across Latin America. If this happens, Spanish companies will feel the pain. Some may even need government assistance.

Since becoming prime minister Rajoy has repeatedly stated that Spain is not Greece. Nor is it Uganda, he said at one point, with his usual level of tact and diplomacy. In many ways, Rajoy is right: although it may have similar levels of corruption to Greece, Spain boasts a much larger, more advanced economy with higher levels of productivity, better infrastructure and a much bigger external market. As such, comparing the two is an almost pointless task.

But that’s not to say that Spain doesn’t suffer from its own enormous, potentially crippling set of political and economic problems, most of which have been swept under the rug of political expedience. In other words, Spain is Spain and that in itself should be reason enough to worry. By Don Quijones, Raging Bull-Shit.

There is no limit to how far our elected governments will go, and to what extent they will crack down on the little guy, to protect the interests and privileges of oligarchs and oligopolies. Red… The Men Who’re Stealing the Sun