The European elections will decide Spain’s new government

Spanish elections for the national congress and the senate were held roughly three weeks ago, after prime minister Pedro Sánchez called a snap vote as a response to congress rejecting his 2019 budgetary proposals in February.

Sánchez, leader of the socially liberal “Partido Socialista Obrero Español” (PSOE), was only in power as a result of a successful no-confidence motion against the government of Mariano Rajoy’s centre-right, conservative “Partido Popular” (PP). Ten months after that vote of no-confidence, the Spanish electorate went to the polls once again: the third time in four years.

Most notably, it is partly down to the Catalan parties’ refusal to vote in favour of the budgetary proposals that this vote even happened.
The obvious winner from April 28th’s vote is Sánchez himself, who managed to outperform expectations slightly and end up on 123 seats, while the PP lost more than half of its parliamentary representation as it fell to 66 seats.

It was a complete dissection of the right or centre-right vote as coupled with the slump in PP seats, the more extreme right “VOX” party claimed ten per cent of the vote and 24 seats. However, media speculation and polls suggested that the extreme right party would win a larger proportion of seats in the “council of deputies.”

Where does this leave Spain? Well, that is somewhat blurry at the moment. The PSOE can form coalition governments with possibly either, the somewhat extreme left “Unidas Podemos” party who won 42 seats, but would still need support from regional parties to get over the required 175 seats for a majority, or, the more centre or right-of-centre “Cuidadanos” party: an outcome favoured by financial markets as the more pro-business and growth government.

Despite this, a notable number of PSOE voters immediately after the result was announced, shouted at Pedro Sanchez during his victory speech “Con Rivera, no!” (With Rivera, no!) in reference to Cuidadanos leader Albert Rivera. This comes after Rivera himself criticised a lot of what the caretaker PSOE government has been doing in the last two years, especially with regards to the Catalan separatists.

This brings us onto Catalonia, where there is still this cloud hanging over the intricacies of a post-Carles Puigdemont Generalitat. It must be said that with the PSOE being the largest party and almost certain of forming a government, that a political pardon for the Catalan separatists currently on trial in Madrid is more possible than if the PP party had won a majority.

Nevertheless, it is still quite unlikely that any pardon shall be offered, especially if Sanchez manages to form a government without the support of the Catalan separatist parties like “Esquerra Republicana” or “Junts per Catalunya.” It does feel, however, like the Spanish electorate feared the extreme right more than the Catalan separatists. In any case, the negotiations that will start in the upcoming weeks will decide the composition of the next Spanish government.

These negotiations will largely depend on the outcomes of mostly the European Parliament elections, but also the Spanish local elections held on 26th May, which will see councillors elected in the municipalities of Spain and in all 38 provincial deputations as well as some regional elections in twelve autonomous communities.

Sanchez was quite resourceful in the way that he refused to pin himself down to any particular party or combination. He didn’t want to strain relationships with other parties in case the Spanish electorate force him to work with such parties at a regional or European parliamentary level.

The sentiment among the media is still that a far-left/left coalition between “Unidas Podemos” and PSOE is more likely than the “Cuidadnos”-PSOE alignment, but there could very well be a different environment in the next few weeks.

Spain has done well relatively well in terms of economic growth since Pedro Sanchez and the PSOE took over as a minority government, but the Spanish economy needs deeper reforms for it to prove more competitive and dynamic.

These reforms are unlikely to come from a far-left government; in fact, a far-left government would make Spain less competitive and less dynamic.

Spain would benefit from a pro-business PSOE-Cuidadanos coalition, and this coalition may even enable it to continue with its more recent positive economic trend. Hopefully, European Parliament elections and local elections facilitate the creation of a pro-business government.

Written by Jonathan Jurado

Jonathan Jurado is a Master's student studying Business Analytics at ESADE Business School in Barcelona.
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