by The re-run of the Spanish general elections produced a fragmented parliament again, but a minority government could take shape. In Europe, Greece, Portugal and Italy remain political flash points. Read full report hereAfter an inconclusive vote in the December general election and the subsequent failure of Spain’s political parties to reach an agreement to form a government, Spaniards returned to the polls on 26 June. Once again, the results produced a fragmented parliament, but traditional parties ─ the centre-right Popular Party (PP) and the Socialist party (PSOE) ─ performed better than expected.Yet no party achieved an overall majority of seats in parliament, leading to discussions on forming a coalition government. These discussions are likely to be tense. The most likely scenario at this stage is that Mariano Rajoy stays on as caretaker prime minister but then steps down in exchange for a commitment by the PSOE to abstain when the Cortes meets to approve a new prime minister. This compromise would allow the formation of a PP-led minority government. However, new elections cannot be ruled out this year (even though this is not our baseline scenario). Divergences between parties are significant, and on top of the fraught political situation at national level, Catalonia remains an important source of tensions.
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Nadia Gharbi considers the following as important: June Spanish election, Macroview, Spain, Spanish general election, Uncategorized
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The re-run of the Spanish general elections produced a fragmented parliament again, but a minority government could take shape. In Europe, Greece, Portugal and Italy remain political flash points.
After an inconclusive vote in the December general election and the subsequent failure of Spain’s political parties to reach an agreement to form a government, Spaniards returned to the polls on 26 June. Once again, the results produced a fragmented parliament, but traditional parties ─ the centre-right Popular Party (PP) and the Socialist party (PSOE) ─ performed better than expected.
Yet no party achieved an overall majority of seats in parliament, leading to discussions on forming a coalition government. These discussions are likely to be tense. The most likely scenario at this stage is that Mariano Rajoy stays on as caretaker prime minister but then steps down in exchange for a commitment by the PSOE to abstain when the Cortes meets to approve a new prime minister. This compromise would allow the formation of a PP-led minority government. However, new elections cannot be ruled out this year (even though this is not our baseline scenario). Divergences between parties are significant, and on top of the fraught political situation at national level, Catalonia remains an important source of tensions.
Whatever the make-up of the next Spanish government, it will be fragile. As a consequence, the ability of the next government to implement fiscal consolidation and continue the economic reform drive will be restricted.
However, in the coming months Spanish politics may appear to be relatively benign when compared with the fragile situation in Portugal and Greece and, more importantly, in Italy.
Overall, the political landscape in the euro area is likely to remain challenging in the months ahead, threatening the euro area's stability. However, the ECB’s quantitative easing programme is likely to be flexible enough to provide a sufficient buffer to prevent tensions in government bond markets from spiralling into more severe, systemic-like stress.
