• Premier promises voters he’ll have outline deal within a month
  • Socialists, Ciudadanos say they’ll vote against Rajoy

Caretaker Prime Minister Mariano Rajoy’s opening bid for support was rejected across the board as he began to try to piece together a governing majority in Spain.

While Rajoy told Spaniards that he’ll have the foundations in place for a new government within a month, all three of his main rivals pledged to vote against him.

Rajoy’s People’s Party established itself as the most powerful force in Spain after increasing its representation to 137 seats in Sunday’s general election, but he’s still 39 votes short of a majority in the 350-strong parliament. The Socialists, Podemos and Ciudadanos have 188 between them, enough to keep Rajoy out if they can hold their line.

“My hand is still outstretched to guarantee the stability that Spain needs,” Rajoy said in a televised press conference Monday. “We need a government and we need it now.”

Spain’s political leaders are engaged in a war of attrition as they try to eke out gains for their supporters with voters demanding an end to a political impasse that’s lasted more than six months since December’s vote. Spanish government bonds jumped on the PP’s gains, pushing 10-year yields down by the most in two years.

Potential Challenge

Socialist leader Pedro Sanchez is facing a potential challenge from his group’s heartland in Andalusia after posting the worst result in party history. Albert Rivera of Ciudadanos lost a fifth of his party’s lawmakers on Sunday as voters opted for the familiarity of Rajoy’s PP with markets in turmoil after Britain’s vote to leave the European Union.

For both leaders, the best they can hope for at this point may be to force Rajoy to step aside and let another PP leader take up the baton. The prime minister has become a symbol for the corrupt old guard in Spanish politics after a former PP official accused him of taking secret cash payments from a party slush fund. Rajoy denies any wrongdoing.

“If they want our support there has to be a change of government,” Rivera said in a televised briefing. “The Socialists can support Mr. Rajoy.”

The Socialist officials disagreed. Party spokesman Antonio Hernando repeatedly insisted in his own press conference that the Socialists will vote against Rajoy if he faces a confidence ballot in parliament. Hernando suggested Rajoy should try and win the backing of Ciudadanos.

“The Socialists may have to consider letting Rajoy rule and focus on gambits they can expect to win,” said Lluis Orriols, a political scientist at Madrid’s Carlos III University. “Alternatives to a government led by Rajoy are even harder to achieve than they were in December.”

Spain is trying to forge a new political consensus to take the country forward after the trauma of the financial crisis. While the economy has been growing for the past 11 quarters following a five-year slump, unemployment remains above 20 percent and the government is facing a potential fine from the European Union for consistently breaching budget-deficit limits.

Political Arithmetic

Spanish politicians grappled with the new political arithmetic as the aftershocks of the U.K.’s vote to leave the European Union continued to reverberate across financial markets. The pound fell to 31-year low and U.K. stocks tumbled as gold and government bonds rose on demand for haven assets.

“The U.K. opting out adds a lot of pressure for the parties to agree on a government,” Carlos Aragones, who was chief of staff to former PP Prime Minister Jose Maria Aznar, said in an interview Sunday night.

As the Socialist party retained its role as one of the two main parties in Spain, its post-electoral strategy will shape Rajoy’s ability to build a platform to govern. The 137-year old party should make possible a government led by Rajoy, the Socialist’s head in Extremadura, Guillermo Fernandez Vara, told Onda Cero radio before joining a meeting of the group’s executive committee Monday.

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