The Spaniards kicked out a government that lied to them about the source of the bombings. It wasn't that they capitulated to the terrorists, but they punished the guy in office for trying to pin the bombings on the ETA in order to curry favour with his policies and gain some more votes prior to the election.
When it was found out that he lied in order to promote a personal agenda (and that there was no way the ETA could have or would have attacked at that level), Spain let him know that manipulation for political favour wasn't going to be tolerated and he was voted out of office a few days later.
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