Watch out for Podemos in Spain

Spain is becoming another poster child like Ireland, for success of austerity as recent indicators like manufacturing and services PMI, GDP all point to return of growth. However Spain is actually a social tragedy in spite of improvement. Years of tough austerity has disabled the states publics services tools, pushed the middle class towards impoverishment, forced young people to migrate as investments and budgets over education and research were cut. After almost 5 years of high unemployment above 20% and especially among youth close to 40%, the country is not the same which it used to be.

• It can be argued that the steps were necessary at that point in time and may prove successful over the longer term but that seems to be not sufficient enough to subside people's anger.

• In spite of equality and solidarity in Europe, countries were classified as periphery and core.

These factors leading to the rise of leftist parties across the troubled countries that just happened in Greece and as it seems similar could happen in Spain as well over this year's election.

The changes are rapid.

• Greece's Syriza first appeared as a party in 2012 and by 2015 it is leading the government.
• Podemos's rise is even faster. It was launched just a year ago and it is already leading in polls.

Risks ahead -

• Political negotiation to get complicated and fiscal integrity by transferring powers to Brussels could be under serious threat.
• Negotiating powers of Syriza and lefts in European parliaments will rise that might under extreme scenario may even lead to partial breakup of the union.

So far, bond market has not showed much concern over the developments but the stock market of Spain is clearly trailing others. That might change once the election date closes in.