Spanish Socialist Closes In on Power as Podemos Offers Support

  • Sanchez confident he'll form alternative if Rajoy loses vote
  • Podemos offered government pact with Iglesias as Deputy PM

Socialist leader Pedro Sanchez took a big step toward claiming power in Spain Friday as anti-austerity group Podemos offered the support he needs to oust Acting Prime Minister Mariano Rajoy.

Podemos leader Pablo Iglesias made a shock proposal to back a Socialist-led coalition after talks with King Felipe VI in Madrid over the possibilities for forming a governing majority. Iglesias, who finished third in December’s election behind Rajoy and Sanchez, is trying to seize the initiative as the two progressive parties jostle for position ahead of a potential alliance.

“I am ready to get to work,” Iglesias said. “Pedro Sanchez is not in a position to propose a Socialist-only government. I think this opportunity of becoming prime minister shows fate is smiling on him and he should be forever grateful for that.”

While advancing the chances of a governing alliance, Iglesias’s offer -- sprung as Sanchez was in his own meeting with the king -- placed the Socialist leader in an awkward position. With just 90 lawmakers in the 350-strong parliament, Sanchez has been maneuvering for first-placed Rajoy to face, and lose, a confidence vote in parliament before making any move to form his own government. Iglesias is trying to force the pace.

Market Reaction

Spanish 10-year government bonds erased some of the day’s gains after the Podemos announcement. The spread against similarly dated German bunds widened by 5 basis point to 123 at 4 p.m. in Madrid.

Spain’s December election produced the most divided parliament in the country’s history. The PP won 123 seats, the most of any single party, but with no natural allies in the chamber, Rajoy is struggling to muster the support he needs to stay in office.

Sanchez stuck to his guns on Friday, despite the pressure from his rival and potential ally.

“We are going to wait for Rajoy, and if he fails, the Socialist Party will do what it has to do: create a progressive majority,” Sanchez said at a news conference after his meeting with the king. “It’s important in a democratic state to respect the timing of things.”

Policy Not Posts

While Iglesias offered to serve as deputy prime minister in a Sanchez government dedicated to rolling back the austerity policies of Rajoy’s People’s Party, Sanchez said it’s too soon discuss who gets which job. He insisted the two parties would need to agree on a policy program before thinking about how to implement it.

“First, we’ll have to talk about policy, and then we can go into what the government would look like,” he said. “Policy, policy, policy.”

Sanchez needs to keep a lid on tensions within his party with some senior officials concerned about a deal with Podemos, which has emerged in less than two years to challenge the Socialists’ traditional dominance of the Spanish left. Iglesias’s support for a referendum on independence in Catalonia is another potential problem for some Socialist officials, even though the Podemos leader has said he won’t insist that become government policy.

Sanchez faces a meeting with his party’s federal committee on Jan. 30 which will set the parameters for coalition talks.

Podemos’s gambit is “clearly designed to force the Socialists to come into the open and say whether they support this or that they don’t accept it,” said Angel Talavera, an analyst at Oxford Economics in London. “It’s kind of a win-win situation for Iglesias -- if they’re part of the government that’s a great result for them and if it goes to new elections they will expect to do well.”

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