It’s Not All Brexit as Spain Tries to Break Political Deadlock

  • Podemos may benefit from new alliance, increase in funding
  • Lower turnout or a British vote against the EU may help Rajoy

Spain is heading for its second election in six months on June 26 after party leaders failed to piece together a governing majority from the deadlocked parliament.

While polls suggest that the result will be broadly similar to December’s ballot, small variations in the voting could lead to significant changes in the outcome. Here are some of the issues that could trigger such a shift.

Podemos Bulks Up

The anti-establishment party signed an alliance with the former communists of the United Left last month. By pooling their votes, the two groups minimize the number of ballots wasted in an electoral system which is skewed against smaller parties.

In the zero-sum game of parliamentary math, the result is a double whammy: Podemos gets more seats for its vote, while also pushing up the threshold its rivals will have to cross to elect each lawmaker.

  • How much does that help?

Podemos could add as many as 21 lawmakers to its 71-strong delegation in parliament while boosting its vote by just 1.3 percentage points, the state pollster CIS said Thursday.

More Money

Spain’s political system allocates state funding to parties based on their representation in parliament -- a rule that tilts the playing field in favor of established parties.

In December, Podemos and the pro-market reformers of Ciudadanos were running in their first general election so they had little public financing. This time, they have 109 lawmakers between them and that means more subsidies for their campaigns.

Podemos was awarded 2.1 million euros ($2.4 million) by the government last month. That compares with the party’s total spending of 1.9 million euros in the first nine months of last year, a period that included local and regional elections across the country. Ciudadanos got 1.8 million euros. It spent just 1.2 million euros on its last election campaign, according to accounts posted on the party website.

  • How will they spend it?

The extra funding is allowing the two new parties to court voters outside their core constituencies. Podemos’s campaign-mail shot will go to voters across the whole country this time. The party focused its firepower on the cities in December.

Holiday Distractions

Spain is holding a general election with schools on their summer break for first time in at least 30 years. That could reduce turnout.

That situation could be even more marked in Catalonia and Galicia where Friday June 24 is a public holiday and many families traditionally head for the beaches.

  • Who wins?

Podemos and Ciudadanos, which draw most of their support from younger voters, are seen as particularly vulnerable to a drop in turnout. Acting Prime Minister Mariano Rajoy’s People’s Party could be the biggest beneficiary because its supporters, many over 65, are traditionally the most reliable.

The Brexit Wildcard

Spanish voters will be heading to the ballot boxes three days after the U.K. referendum on whether to leave the European Union. More to the point, there’s only one trading session between the close of the polls in Britain and the start of voting in Spain.

That means markets may not have time to stabilize again if they are roiled by the result in the U.K. So Spaniards may have to decide on whether to stick to what they know, in the form of Rajoy, or take a chance on one of his rivals before the consequences of the British referendum have become clear.

  • How does that break?

If investors are in risk-off mode because Britain is leaving the EU, that could increase the appeal of Rajoy’s promises of economic stability.

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