Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen.

All is not well in southern Europe. Six months ago I wrote in this space about southern Italy's crumbling infrastructure and rotting structures. Italy's voters just presented the bill to their politicians. 

Two recent long weekends in Spain, where our daughter studies, confirm the economic crisis but also the deep structural problems behind it. No a los recortes (‘no to [budget] cuts') reads the poster sticking out from the kids' little rucksacks when the family is out for its weekly Sunday walk cum demonstration. Tables in the best restaurants in Madrid and Barcelona can be had by walk-ins where once reservations had to be made weeks in advance. The menus are unchanged but at the bottom a fat print-out - ‘25% ON ALL PRICES' - is stuck under the plastic cover.

But the Spanish wound in Europe's soft underbelly cuts even deeper. The country's leading daily, El Pais, in its English edition on 16 February said categorically: 'Serious as the ongoing economic crisis is, it pales compared with the political and institutional crisis facing the nation.' The tribal and corporatist character of Spain's politics and economy has historical and colonial roots, but is also a legacy of long authoritarian years under Franco. Buried for almost 40 years under the political adrenalin of new found democracy, soon followed by financial largesse thanks to easy European money, it is now laid bare by the crisis in the southern half of the eurozone.

And yet, when you start scratching, probing and connecting, the first encouraging signs of firm democratic flesh appear.

Understanding has dawned in Spain that of the three main pillars of any sustainable political system anywhere - state power, rule of law and accountable government - the latter two need fixing. The authority of the monarchy, hitherto on a pedestal thanks to some early democratic moves by the king, is in free fall after African safari peccadilloes by Juan Carlos and a criminal indictment against his son-in-law for fraud. Prime Minister Rajoy and his whole cabinet is taken to task, and probably will have to quit, for having received considerable 'shadow salaries' from murky party coffers over many ears.

So it's not the economy that's turning but the political climate that's changing, though throwing the rascals out is also a first step towards economic recovery in a country where the political fundamentals are basically sound, just as is the case in most other European countries.

Any snickering from the commanding economic heights in other parts of the world, especially the Asia Pacific, will have to be complemented by convincing proof that the same can be said for politics at home.

That is what the markets don't (can't?) get. FISH (France, Italy, Spain, Holland) is the latest 'Goldman speak' for bond market bears. But why should the abbreviation artists have it right this time when they had it wrong on BRICS (where growths stories always varied widely and are very different now) and PIGS/PIIGS (no, neither Portugal nor Greece, let alone Ireland, dropped out of the eurozone)? What the market whisperers seem to forget is that sovereign futures are made up in equal parts by economics and politics.

The Nobel prize has been given to the EU for 65 years of protecting the peace on a continent notoriously ridden by conflict and glaring inequalities throughout its history. The self-cleaning power inherent in European democracies is now its major political strength. That is real change.

Photo by Flickr user arribalasqueluchan!.