Bank of Spain's Linde Says Political Uncertainty May Hit Economy

  • Linde says next government must respect EU rules, framework
  • Socialist leader continues talks for alternative government

Bank of Spain Governor Luis Maria Linde said political uncertainty may hit the nation’s recovery as lawmakers struggle to form a government following an inconclusive election.

Speaking at a conference in London, Linde, who is also a member of the European Central Bank’s Governing Council, said the lack of clarity surrounding the next government could have an impact on some investment decisions. He noted that the administration will have to respect budget rules in line with European Union guidance, regardless of who’s in power.

“It is obvious that the formation of a new government may affect some investment and consumption decisions,” he said Tuesday, pointing out that the impact has so far been limited. “In any case, I take it for granted that any new government will show respect towards European Union commitments and the general framework for the European Union fiscal governance.”

Socialist Leader

His remarks come as Socialist leader Pedro Sanchez continues negotiations to form what he describes as a “progressive” government after December’s election left no group with a clear majority.

For Sanchez to succeed, he will have to rally support across the political spectrum, ranging from pro-market Ciudadanos to anti-austerity party Podemos in the 350-seat parliament. He’s promised to renegotiate Spain’s deficit reduction pace and introduce a new labor market reform to include more rights for workers.

The economy grew 3.2 percent in 2015, the fastest pace since the crisis began, and is projected to grow 2.8 percent this year, according to the European Commission. Despite this, officials in Brussels see the country missing its deficit target in both years.

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