Spain Set for New Election as King Finds No Party Can Govern

  • No candidate has enough support to form governing majority
  • May deadline to form government sets in motion summer ballot

Spain is heading for new elections this summer after parliament failed to choose a prime minister for the first time in the country’s democratic history, its leaders divided over how to help those left behind by the recovery while reining in the euro area’s biggest budget deficit.

King Felipe called a halt to the efforts to forge a governing majority after a third round of talks with party leaders Tuesday, concluding that none of the candidates had enough support to win an investiture vote. The official deadline for the parties to reach an agreement is May 2. The new ballot is likely to take place on June 26.

Party leaders are struggling to get to grips with the tectonic shift in national politics after young voters flocked to new political movements ending more than 30 years of two-party rule, just as disaffected Americans are responding to Donald Trump and some Britons are channeling their frustrations toward the European Union. While the ideological differences between insurgent anti-austerity group Podemos and pro-market Ciudadanos made a governing alliance impossible, both pushed back against the entitlements of an entrenched elite.

“All this is an issue around how many people in these democracies feel like they are left behind, and they are worried about the children’s future,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager, said in a Bloomberg Television interview. “Whoever is the leader of Spain, of the U.K., of the United States we are going to see probably greater emphasis toward fiscal policy.”

Polls suggest the result of a new ballot may be little different from December, forcing a fresh round of coalition talks with the economy losing steam and the European Union demanding urgent action on the budget deficit.

Renzi Boasting

“I read reports about new elections in Spain,” Italian Prime Minister Matteo Renzi said on Twitter. “With the new election law and the constitutional reform, Italy today is the most stable country in Europe.”

Italy’s 10-year bonds yield 10 basis points less than Spain’s, even though Spain’s economy is growing three times as fast as Italy’s.

“It’s true that it’s not good having fresh elections,” Acting Prime Minister Mariano Rajoy told a meeting of lawmakers from his People’s Party on Wednesday. “But it’s better than a government that tries to bring together the Socialists, Ciudadanos and Podemos.”

Blame Game

A last-minute bid to broker a deal floundered on Tuesday as Ciudadanos leader Albert Rivera rejected a proposal from a regional party associated with Podemos and attention swung toward the coming campaign.

Socialist leader Pedro Sanchez blamed Pablo Iglesias of Podemos for negotiating in bad faith while Rajoy said Sanchez had ignored voters’ calls for compromise and Iglesias questioned the Socialist leader’s commitment to the progressive cause. Rivera said party leaders had let the voters down.

“All political leaders have failed,” Sanchez said in an interview on Cope radio on Wednesday. “But some leaders worked to try and create a government for change, and others didn’t.”

Podemos Gains

Podemos could be the biggest beneficiary of a re-run if Iglesias can seal an alliance with the former communists of the United Left. The two groups won 6.1 million votes between them in December compared with 5.5 million for the Socialists.

Running together, those parties could get 80 seats in the 350-strong legislature compared with 71 in December, according to an average of polls calculated by website Electomania. Rajoy’s People’s Party would win the most lawmakers though its representation would slip to 118 from 123, just above the 117 seats it needs to maintain a veto on constitutional reform.

The Socialists would slide to 84 seats from 90 while Ciudadanos would add six lawmakers to 46.

“If the electoral results are similar to the one in December, the negotiations will be just as difficult and the pressure to reach an agreement will be even greater,” said Antonio Barroso, a London-based analyst at Teneo Intelligence.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE