of Pedro Sánchez, under pressure from its far-left allies, approved a housing law that allows regional and local governments to cap rent increases. “The way to fix a disastrous situation isn’t not to protect anyone,” says an official at Spain’s housing ministry. Yet the rent-control approach has perverse consequences. Jorge Galindo of Esade, a business school in Madrid, compares it to ordering the queue rather than trying to reduce it. It favours insiders—those who are already renting—at the expense of outsiders who are unable to find a home. Take Catalonia, whose regional government has applied rent caps for most of the period since 2020 and has imposed additional regulations on landlords. The result in the first two years was a 5% fall in rents for existing tenants, but a 10% fall in the number of new rental contracts, according to a study led by José García Montalvo of Pompeu Fabra university in Barcelona. “Regulation has created uncertainty,” he says. “Landlords don’t know what to do.” Dutch controls have had a similar outcome. Landlords barred from charging market-rate rents often sell their apartments, reducing the supply of rental housing. Those who suffer are “the people at the bottom, with limited budgets” or recent arrivals, says Matthijs Korevaar at Erasmus University in Rotterdam. Rather than bludgeoning landlords, it may be better to coax them with tax cuts on rental income: Portugal has cut income tax on rent for moderately priced homes from 25% to 10%. Mr Sánchez has offered a tax break for landlords who don’t raise rents. The imperative is to build more homes. But that is harder than it sounds. Mr Sánchez has launched a €7bn ($8.2bn) four-year plan focusing on public housing. The Catalan regional and Barcelona city administrations have similar plans. But mayors and regional governments control most development land, and many practice NIMBYism. “The bottleneck is administrative,” says Said Hejal of Kronos, a firm that builds mainly mid- market housing in Spain and Portugal. In Catalonia it can take 12 years to get the permits to build. A draft land law which would cut red tape fell foul of the bad blood between Mr Sánchez and his conservative opponents.
Europe faces a shortage of construction workers. Spain has only enough to build 100,000 homes a year says Mr Hejal. After the bursting of a housing bubble in 2008, when the country was building an excessive 560,000 houses a year, many immigrant building workers went home. Many others switched to less demanding jobs in tourism. The continent’s construction industry is inefficient, with many small and backward firms. The Iran war has driven up the costs of building materials. Governments have only just started to tackle this bottleneck. To cut costs, a public-housing project in Stockholm features standardised elements such as kitchens. Mr Sánchez’s plan includes spending €1.3bn in European funds to ramp up industrial production of modules for housing construction. Portugal’s government is planning a cut in VAT on construction from 23% to 6% for affordable homes. But many are still fixated on engineering of the social kind. In Germany, spending on housing benefits for individuals has exceeded spending on new housing projects ever since 2005. It is now around four times higher. In the short term, subsidies without construction may relieve some residents’ headaches. In the long term, they worsen the migraine for everyone. ■ To stay on top of the biggest European stories, sign up to Café Europa, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//europe/2026/05/14/to-understand-european-voters-anger- look-at-their-rent-bills
Socialism is being left behind in Europe The workers’ parties aren’t working May 14th 2026 Anyone despairing at the trajectory of their career should spare a thought for Europe’s socialist politicians. At the turn of the century over two-thirds of citizens in the European Union lived in countries run by leaders from the centre-left. The continent’s future looked red, or at least rose-tinted. Granted, the likes of Gerhard Schröder in Germany and Tony Blair in Britain were hardly dyed-in-the-wool pinkos; they aimed not to overthrow capitalism but to temper its excesses. Yet their trick of pinching the right’s best ideas and mixing them with leftie shibboleths soon lost its lustre. By 2016 the number of Europeans living in countries run by social democrats had slumped to just one-third. Those who assumed the pendulum would soon swing back leftward have had their hopes dashed, then dashed again. Today only three of the EU’s 27 national leaders are progressives—Pedro Sánchez in Spain,
Mette Frederiksen in Denmark and Robert Abela in tiny Malta. They represent just a tenth of the union’s population. It could soon be less. On May 8th it was announced that Ms Frederiksen had failed in her initial bid to form a coalition government following elections in March. Her deputy as prime minister, Troels Lund Poulsen, has been asked by the king to see if his centrist outfit can cobble together an alliance, thus booting Ms Frederiksen into opposition. The canny incumbent may yet find a way to cling to office, despite having led the Social Democrats to their worst electoral score in well over a century. But even a Danish reprieve would be a scant consolation for her fellow European socialists. Ms Frederiksen is the black sheep of the continental left, having thrived in part by being ostentatiously tough on migrants, a formula that many in her camp feel betrays the humanist roots of their creed. (They are much happier with her willingness to stand up to Donald Trump, who inadvertently gave Ms Frederiksen a boost in the polls by threatening to invade Greenland.) Once the party of labour, Europe’s centre-left now spends much of its time searching for gainful employment. Could the continent become a socialist- free zone, at least at the top of national politics? Mr Sánchez is the left’s last great hope, yet he will face voters within a year or so, and his party is lagging behind the centre-right. It is not clear who would replace him as a figurehead for the defenders of the euro-proletariat. The Netherlands is the only one of the EU’s biggest ten countries in which socialists (after having merged with an erstwhile Green rival) have eked out a narrow lead in the polls—and the Dutch are not due to hold national elections for four years. A few smaller countries may deliver left-leaning governments, for example Sweden or Finland. In Germany and Poland the centre-left is a junior partner in governing coalitions; in Romania it recently brought one down. But it is harder than ever to imagine the left running the show in a country with real sway in EU affairs. The German SPD has been battered in recent regional elections and languishes at 13% in nationwide polling, behind the centre-right, the xenophobic AfD and the Greens. In France no socialist is polling well ahead of next year’s presidential election (the candidate in 2022 got just 1.8% of the vote). In many parts of central Europe there is barely a socialist party to contest elections, let alone win them. Beyond a few town halls, the only modicum of power socialists still hold is at EU level, and
even that is much weakened. The centre-right holds most of the big jobs in Brussels and is busy implementing a deregulatory agenda, over the progressives’ objections. What went wrong? Endless academic tracts attribute the left’s decline to the gradual disappearance of the factories, docks and mines that once provided socialism’s natural habitat. For a while the centre-left seemed to have done a good job replacing blue-collar workers with graduate types: out with metal- bashers, in with schoolteachers. Fair enough. Still, the challenge of adapting to the times should have been yet more acute for the socialists’ historical rivals, the Christian Democrats. They faced a continent where churches were emptying even faster than trade-union halls. Somehow the centre-right managed, while the left did not. More acute has been the effect of political fragmentation. Social democrats used to be one of two main options on Europeans’ ballot papers. Even in the wake of election losses the political cycle could be trusted to send power back their way given time (as it continues to do for example in America, where Democrats will make gains in the midterm elections in November). The splintering of European polities into many parties has also affected the centre-right. But socialists have seen their share of the vote nibbled on three sides. Other parties of the left, both Greens and hardened Marxist types, have made inroads. Some lefties ditched the party for a lurch into the political centre, notably in France under Emmanuel Macron (once a minister in a Socialist government). Many “left-behind” post-industrial areas that once voted for progressives flocked to populists on the right. One optimistic interpretation of the left’s woes is that its faded prospects reflect its past achievements. Who in Europe now calls into question the importance of pensions, paid holidays, soaking the rich and other socialist tenets? The movement’s cadres warn against such complacency. Just because social rights have been secured in the past does not mean they aren’t under threat, says Giacomo Filibeck, secretary-general of the Party of European Socialists, which brings together parties on the continental left. There are still plenty of workers left in Europe. They may fret about artificial intelligence pinching their jobs just as much as their forebears did about pit closures. Yet few seem to think the political left speaks for them.
Socialists spent decades warning capitalism would eat itself. The cruel joke is that it ate them first. ■ Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence. This article was downloaded by zlibrary from https://www.economist.com//europe/2026/05/14/socialism-is-being-left-behind-in-
The EU and China are stumbling into a trade war Swamped by Chinese exports, Europe nears a point of no return May 14th 2026 THE CHANCES of a trade war between the European Union and China are far higher than most Europeans realise. In the corridors of Brussels, insiders have theories to explain this calm. One involves a Trump effect: political and business leaders spend too much time reacting to provocations from Donald Trump and his team. Chinese bullying is discreet. If Xi Jinping shared his darkest thoughts on social media, more leaders might realise that, compared with America, China is a more urgent threat. There is complacency on China’s side, too. To prosper, Chinese exporters need the EU’s 450m consumers, especially as America walls itself off. Yet Chinese officials shrug off European pleas to tackle trade imbalances. Those now run at €1bn ($1.18bn) a day in China’s favour amid surging Chinese