Spain Jobless Claims Rise as Politicians Seek to Avert New Vote

  • Rajoy prepares to face second confidence ballot later Friday
  • Caretaker government warns third election will hurt economy

Spanish jobless claims rose more than expected in August as caretaker Prime Minister Mariano Rajoy struggles to piece together a parliamentary majority, increasing the risk of an unprecedented third election in a year.

The number of people registered as unemployed rose by about 14,000 from July, the first increase in six months, the Spanish Labor Ministry said Friday. The increase was greater than economists’ forecast of 3,400, the median of four estimates in a Bloomberg News survey. Spanish jobless claims typically rise in August as much of the country shuts down for the summer break.

Rajoy is preparing to face a second confidence vote in parliament later on Friday as he struggles to end the eight-month deadlock that has brought legislative action to a halt through two inconclusive elections. While he’s extended his support in parliament thanks to a deal with the pro-market reformers of Ciudadanos, Rajoy is set to lose the vote as his traditional rivals, the Socialists, line up against him alongside the anti-establishment group Podemos and Catalan parties riled by his hardline stance against separatists.

The parties that have dominated Spanish politics for a generation are trying to adjust to new forces that have emerged since the economic crisis, fragmenting the popular vote. If Rajoy isn’t able to broker an alternative deal within the next two months, the nation will be heading for another election, which, according to election rules, would fall on Christmas Day.

“The system in Spain has been a very clear cut two-party system,” Ana Palacio, former Spanish Foreign Minister who served alongside Rajoy in a previous People’s Party administration, said in a Bloomberg Television interview with Flavia Rotondi. “By just pointing fingers, we won’t solve anything. We need to address that the Spanish system needs to perform in a new reality that is multi-party.”

As the deadlock stretches on, Spain risks missing an October deadline to submit its 2017 budget to the European Commission for oversight. While the economy has held up so far with output beating expectations, the caretaker government has warned the recovery will be hit if the impasse continues.

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