José María Aznar used to be called dull. These days, with a second national election victory under his belt, he's called serene. Aznar first led his Popular Party to victory in 1996, barely defeating the Socialists under the rock-star popular but scandal-weakened Felipe González. Then he was portrayed as a colorless former tax inspector whose policies were driven by pragmatism and market forces. By last March, as Aznar-era prosperity swept a rejuvenated country, the prime minister's failings had become his assets. His was seen a steady, even ruthless hand, unmoved by the emotion-drenched ideological arguments of the past. There's no doubt that Aznar's cool pragmatism has paid off—for him and for the country. According to the Center for Sociological Research in Madrid, Spaniards feel better about themselves than at any time since 1983.

 When Aznar took over the PP leadership in 1990, the party was still tainted as the party of Francoism. Aznar knew he had to change that. He federalized the party so that it reflected the reality, enshrined in the 1978 Constitution, that Spain is "a nation of nations," in the words of the political analyst Emilio Lamo. So in Catalonia, one of Spain's 17 largely self-governing "autonomous regions," the PP's regional organization came to be known by its name in Catalan. The symbolism was important: the PP was pledging allegiance to the post-Franco Constitution. Aznar also purged the party of Franco stalwarts. In 1996, Aznar was asked if there was not "a whole Jurassic Park" of hard-line right-wingers hiding behind him. He didn't smile. "In Spain," he said, "the far right no longer exists."

Increasingly, that is true. Aznar himself was relatively young—a university student—when Franco died. Aznar told NEWSWEEK in a recent interview that the March election showed that Spain reached "a new level of political maturity." He added: "The past is in the past for good." In contrast with his isolationist party ancestors, Aznar, 47, is very much a man of the new Europe (when he and his friend British Prime Minister Tony Blair are together, they speak French). Under Aznar, Spain joined Europe's single currency. Like Blair and many other post-ideological European leaders, Aznar consciously drove his party toward the center during the 1990s. Aznar's outward blandness has been an effective cover for real, even radical, reform. He has privatized state industries, trimmed unemployment, begun to reform labor laws and presided over record levels of economic growth. But he has done this without the personalismo—the cult of personality—that has infected much of Spanish history.

 Not many countries have had to climb out of history's cellar the way Spain did. Forty years of Franco, says John Carlin, an Anglo-Spanish journalist who lives in Barcelona and writes for the newspaper El País, "poured a giant slab of cement over the body and soul of Spain." Spain was a closed, bleakly authoritarian society that many citizens yearned to escape. Alberto Letona, now the director of a Basque cultural foundation, remembers, "When I was 18 years old and went to England, I breathed freedom." For a newspaper to even print the word "strike" was forbidden, says Felipe Sahagun, a columnist. In the post-Franco transition to full democracy and then during 14 cathartic years of Felipe González, Spain flourished as a newly open society, bursting with civil liberties, libertinism and artistic ferment.

 It took the years of the first Aznar government to complete Spain's transition to a modern, economically vibrant society. When the PP won the 1996 election but needed a coalition to put together a majority, Aznar, nervous and twitchy, looked like the loser. "Never has a defeat been so sweet," González said at the time. Aznar is looking much more confident these days. Asked in the interview about one of the biggest problems facing Spain—a long-festering terrorist movement in the Basque country—Aznar responded with something verging on sang-froid. The armed separatists of ETA will have to surrender; when they do, the government "will know how to be generous." To Aznar's critics this seems a dangerously hard-line stance in dealing with what Sahagun says is Spain's "Achilles' heel."

 A newer, more widespread problem is immigration. As immigrants—many of them illegal and from North Africa—flow into a country that used to be a net exporter of people, there have been occasionally ugly clashes with the local populations. The government has managed to contain the trouble, but Spain's image and its increasingly profitable niche as Europe's year-round garden will suffer if there is more violence. Perhaps understandably, for all his brimming-over confidence, Aznar is not averse to hedging his bets. He wears two South American string bracelets, one on each wrist. He laughed when asked about them: "They're to ward off evil spirits." So far, so good

Villalonga's emergence is very much the story of Spain's new, revitalized economy: borderless, outward-looking and entrepreneurial. Now 47, he was one of several youngish executives deployed by the Aznar government to knock state-owned companies into shape and prepare them for privatization. Villalonga had spent nearly a decade at McKinsey & Co., the management-consulting firm, and then went to work for several international banks. As a school chum of Aznar's, Villalonga has never quite managed to dispel the charge of amiguismo, or cronyism, that greeted his appointment to run Telefónica. Similarly, he has been criticized for offering fat stock-option schemes to senior management (Villalonga himself could net $8.7 million), for his frequent use of Telefónica's corporate jet and even for his voracious acquisitions, including the recent $5.3 billion purchase of Endemol Entertainment, the Dutch company that is Europe's largest producer of TV programming.

 The fact is that Villalonga's high-flying, rough-and-tumble style was bound to cause friction in a country unaccustomed to his sort of business brass. He can be as aggressive in firing executives as he is in rewarding them. He travels in exclusive circles. He is a representative to the Trilateral Commission, an elite foreign-policy organization. Along with the likes of former U.S. secretary of State Jim Baker and former British prime minister John Major, he served as an adviser to the Carlyle Group, an investment firm, until he stepped down because he was too busy. He rarely grants interviews, closely guards his personal life and is prickly with critics. When the rumor went around earlier this year that he was about to leave Telefónica, he responded true to form: "I have plans for the next five years. From 2001 on, [Telefónica] will create a new company each month." When the world slavered in approval over the proposed AOL-Time Warner merger last January, Villalonga believed his own merger philosophy was vindicated. "It is very easy to watch a bullfight from the stands," he scoffed at his detractors.

 The fact that Villalonga is such a force today is a sign of just how much the Spanish business scene has changed. Five years ago, to the extent the world knew anything about Spain Inc., it knew about the huge tourism industry (which last year grew faster than any other country's); Iberia, the state airline, and Seat, the automaker. Today the business pool is much deeper and broader, including such up-and-coming companies as Telepizza and Inditex, the firm that owns the fashionable clothing stores Zara and Pull & Bear and which is expanding fast in Europe, Latin America and the Middle East. These newcomers and old-line companies such as Repsol, the former state oil monopoly, are riding a wave of extraordinary economic expansion. The boom owes a lot to the liberalization of the economy under González and especially Aznar, but also to phenomenal inroads Spanish banks and other companies have made in Latin America. Last year Spain had the highest growth rate of any major EU economy—4 percent. Since 1996, Aznar's government has helped to drive the unemployment rate down from 23 percent to 15 percent. The rate is still, on paper, the worst in the developed world. However, because many Spaniards work on the sly while collecting unemployment benefits, the numbers are wildly misleading; the true unemployment rate, according to most economists, is less than 10 percent—bad but manageable.

 Spain is now a surprise rising star in information technology. The Aznar government made liberalization of the telecommunications sector a priority; indeed, it ended up beating the EU's 2002 deadline for full liberalization by more than two years. In March, Spain awarded the third-generation (3G) mobile- telephony licenses that will over time allow instantaneous links between cell phones and the Internet. Spain is the second European country (after Finland) to do so. That kind of rapid-response adaptability persuaded Worldlyinvestor.com, an online advisory service, to pronounce Spain "Europe's second-most advanced telecom nation" (after Finland). Worldlyinvestor.com also touted Villalonga as "arguably the toughest and ablest telecom chief in Europe." That's one judgment Villalonga probably wouldn't scoff at.

 The true new Spain lies somewhere in between Almodóvar's wacky Barcelona and his prim hometown. Religious street festivals are still common. The long lunch is still a fixture—a daily reminder, says the journalist John Carlin, that family and friends trump work. Even the prime minister admits to enjoying the traditional afternoon siesta (though only on the weekend). Nobody gossips in print or on the air about the private life of King Juan Carlos or his family. The prime minister may have put women politicians in charge of both houses of the legislature for the first time in Spanish history, but the society as a whole remains more macho than most other European countries.

 Almodóvar's image of Spain, as zany as it is, is firmly grounded in the post-Franco reality. Smoking hashish or marijuana has been decriminalized; heroin and cocaine addicts take their drugs in special centers in an attempt to cut down on violence and disease. Graffiti on the walls in the Madrid gay district of Chueca informs visitors: you are now leaving the hetero zone. Men who a generation ago feared the police now feel safe asking them for the names of the nearest gay bars. All the daily papers, including the conservative ABC, lists hundreds of personal ads from prostitutes. "The freedom with which my characters live," Almodóvar told NEWSWEEK, "would be impossible in Franco's Spain, [when even] the freedom to tell a story from my point of view was forbidden."

Daily life was the first thing to open up, followed quickly by the arts. Politics came next and then, more slowly, the national economy. The period of the democratic transition was the most electrifying moment of all, says Almodóvar, who became the irreverent voice of post-Franco Spain. By day he was an administrative assistant at Telefónica, then state-owned. By night he was part of the movida madrileña—the wide-open Madrid youth scene—a free spirit who partied hard, brainstormed hard and made his first film ("Pepi, Luci, Bom and the Other Girls"): "It was an explosion of life, the rebirth of joie de vivre, the younger generation seeking pleasure as its immediate objective, the legitimacy of all political choices and the loss of fear of the police. All these things are reflected in my first movies."

 The change was about liberty, not just libertinism. In 1981, Picasso's "Guernica," which some art historians consider the greatest painting of the 20th century, finally made it to Spain after more than four decades of exile imposed by the artist. The work depicts the first instance of carpet bombing in history: the destruction of the Basque city of Guernica by the Germans, who were then aiding Franco's forces against the republicans during the Civil War. Picasso, having painted it in France, instructed that the painting not be exhibited in Spain until democracy was firmly re-established.

 "Guernica's" return, in its day, stamped a seal of approval on democratization in Spain. The Guggenheim Museum Bilbao, which opened in 1998, made a similar statement. "Like a great cathedral might have in medieval times, [the museum] speaks to this new atmosphere, this new Spain," says Juan Ignacio Vidarte, its general director. Under Franco, the people of Barcelona and of the Basque country could not speak their own languages in public, and Spanish society as a whole shut itself off from the rest of the world. The Guggenheim Bilbao, the greatest Spanish cultural icon of the 1990s, turns Francoism on its head by being Spanish but also Basque and outward-looking: its art work is captioned in the Basque language; it was designed by the Los Angeles-based architect Frank Gehry; it's a branch of the Guggenheim in New York; a large contingent of its more than 1 million visitors a year comes from France.

 In a lofty way, the Guggenheim Bilbao raises a very basic question about Spain's growing presence on the world stage: will success spoil hispanidad, the cherished notion of Spanishness? Already some cultural figures, like the 27-year-old director Alejandro Amenábar, are criticized for being "not Spanish enough." Amenábar is making his first English-language movie, "The Others," with Nicole Kidman. Paramount is planning to make an English-language version of Amenábar's thriller "Open Your Eyes," possibly as a vehicle for Tom Cruise. Almodóvar is writing a script in English for MGM. Penélope Cruz, born in Madrid to a hairdresser and an auto mechanic the year before Franco died, is a citizen of Hollywood, not just Spain.The director Carlos Saura, whose "Tango" was nominated for an Academy Award, begins work this year on "The Maid of Buttermere"—in Britain. Are the "best" Basque painters those who work in New York, like Txomin Badiola and Dario Urzay? Is the Flamenco artist Joaquín Cortés a sensation because he's wildly popular in London, New York and Tokyo? Is the teenage golfing phenom Sergio (El Niño) García a sensation because he's viewed as a player who can challenge America's links superstar, Tiger Woods?

 The stars of the new Spain are those whose impact reaches beyond its borders: Aznar, the model to center-right politicians across Europe; Villalonga, the global entrepreneur. The Barcelona writer Sergi Pamiés says that "as prosperity rises, nationalism will decline" in the autonomous regions and across Spain as a whole. "Amnesia," he says, "is integral to what is happening in Spain today."

 Pamiés has a point, but Spain is hardly on the verge of forgetting what came before the transformation of the last 25 years. If Franco or franquismo were still alive, says Almodóvar, "I imagine I would have immigrated to France and now I would be making underground films, or writing amusing cabaret-theater pieces—in French of course." Such a storyline has a distinctive Almodóvar wackiness to it. But Spain is better off with the real-life ending it is living through today.

© 2000 Newsweek, Inc.