This is a psychological thriller.
It is too bad that reviews and comments here almost all address the movie from the perspective of horror movie fans. This is not a horror movie. It is best described as a psychological thriller, based on chidren's fertile imaginations.
The key point is that Veronica is a psychopath, not a witch. She adopts the pose of one by listening to the tales of her superstitious nanny.
There are no supernatural events, and the deaths are caused by natural causes. The piano teacher dies because she had a bad heart, not because of Veronica's spells. This is made clear when we, the audience, overhear Fabiola's parents talking after her death. The mother says Madame Rickard has had two stokes and still smoked like a chimney. But Fabiola coming to the balony does not hear this. She only hears and misreads her mother's final words. Thus, she mistakenly believes Veronica really did have the devil kill the teacher.
I think the true merit of this film lies in the way the film-makers show us how the events occur while making plausible how Fabiola could reasonably come to believe that the devious and clever Veronica was a true witch with supernatural powers. The genius of this movie lies in its sophisticated evolution of the two girls' relationship as Veronica assumes increasing power over Fabiola until the superb and unexpected ending.
This gem of a movie deserves a wider audience than just horror fans. I give it a 9/10 rating.
Blaine in Seattle