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06 January 2016

Open Europe: Re-run elections loom in Spain as little progress is made in forming new government

Talks over the formation of the new Spanish government have been going on throughout the Christmas period, but no clear progress has been made. As a result, re-run elections are looking increasingly likely almost by the day.

Rajoy calls for three-way alliance with Socialists and Ciudadanos

In an interview with Cadena COPE yesterday, acting Prime Minister Mariano Rajoy called on both the Socialist Party (PSOE) and the centrist newcomer Ciudadanos to back a government led by him in order to work on “some of the big reforms Spain needs.” From Rajoy’s point of view, this is a logical move. He was never going to let PSOE leader Pedro Sánchez sit on the fence indefinitely.

Sánchez between a rock and a hard place

Pressure is therefore piling up on Sánchez – who seems to be running out of good options quickly. A grand coalition with Rajoy’s Partido Popular (PP) would essentially mean political suicide for PSOE. In addition, a few influential Socialist regional leaders – notably including Andalusia’s Susana Díaz – have categorically rejected an alliance with the anti-establishment Podemos as long as the latter continues to support a binding independence referendum in Catalonia.

Needless to say, this ‘neither PP nor Podemos’ line would make re-run elections inevitable. At that point, Sánchez would likely have to give way to a different Socialist candidate and PSOE may well fare worse than in the 20 December election anyway – Rajoy would spare no effort to blame the Socialists for failure to form a new government. [...]

How could Catalonia come into play?

So far, the main hurdle to an alliance between PSOE and Podemos has been the latter’s willingness to allow a binding independence referendum in Catalonia. Similarly, this appears to be the key reason why Ciudadanos has said that it would vote against any government involving Podemos. However, the political scenario in Catalonia could be changing in the coming weeks – and this might have an impact at the national level.

On Sunday, the Catalan anti-system separatist party CUP confirmed its opposition to Artur Mas being re-elected regional President. Unless an eleventh-hour deal can be sealed by 10 January, snap regional elections will have to be called. [...]

Re-run elections sooner or later?

Where does all this leave us? At the end of the day, the bottom line is that something has to give or it will be simply impossible to put together a new government. If everyone sticks to their ‘red lines’, Spain is bound to fresh elections fairly soon – with no guarantees of a radically different outcome from what we saw last month. Even if an agreement is reached to have some form of minority government led by Rajoy, doubts over its sustainability would remain. For example, could such a government ever pass a budget which involves further cuts? All of this points to further uncertainty for Spain, definitely in the short term and possibly in the longer run too. The big question is whether or when this might start hampering the economic recovery underway.

Full article on Open Europe

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