- Election year increased political risk even as economy grew
- Socialist leader Sanchez faces confidence vote this week
Spain experienced the biggest outflows since 2012 last year as uncertainty about elections took its toll on appetite for keeping funds in the country.
Investors took out 70 billion euros ($76 billion) in 2015, after bringing funds into the country for two years in a row, the Bank of Spain said Monday. That’s the highest since 2012, when investors pulled out 171 billion euros as the country sought a 41 billion-euro European bailout to prop up its banking system.
“You had the regional elections, the Catalan vote and the general ballot in December, all of which helped amplify political risk even as the economy improved,” said Angel Talavera, an analyst at Oxford Economics in London. “Looking forward, the question is whether uncertainty drags on sentiment going into the first quarter.”
The biggest outflows came in December, coinciding with an inconclusive general election that produced an ongoing political deadlock, and June when investors digested the results of regional and municipal elections a month earlier that saw candidates backed by the anti-austerity party Podemos taking office in Barcelona and Madrid.
While the nation is growing at the fastest pace since 2007, the political outlook isn’t clear. Socialist leader Pedro Sanchez is gearing up for a March 2 confidence vote in a bid to become prime minister. The incumbent Popular’s People party and Podemos say they won’t let that happen.
If Sanchez fails to win a majority, a second vote is scheduled to take place 48 hours later, where only a plurality -- more votes in favor than against -- will suffice. If no deal is reached, the nation could be heading for new elections in June.