Socialist Head Fights to Survive as Spain’s Rajoy Eyes Power

  • Party splits over leader Sanchez’s opposition to PP government
  • Political impasse into 10th month with parliament divided

Socialist Leader Pedro Sanchez huddled with a dwindling group of allies in his Madrid headquarters on Thursday, as the dispute over whether to let acting Prime Minister Mariano Rajoy return to office tore his movement apart.

Sanchez is trying to regain control of his party after 17 of the 35 members of its main decision-making body resigned on Wednesday demanding his ouster. To counter that, the remaining officials on the executive committee announced a leadership contest for Oct. 23, a move designed to shore up his position with the backing of the rank-and-file. Rebel leader Veronica Perez told reporters earlier on Thursday that the mass resignations meant the executive body has been dissolved and Sanchez is no longer in charge.

Pedro Sanchez

Photographer: Miguel Riopa/AFP via Getty Images

Like Labour’s Jeremy Corbyn in the U.K., Sanchez is betting the party’s rank-and-file will endorse his stand against Rajoy over the rebels’ calls for compromise, though analysts don’t give much for his chances.

“We are reaching ground zero of the political crisis in our country,” Lluis Orriols, a political scientist at Madrid’s Carlos III University, said in a telephone interview. “This will make it possible for Rajoy to negotiate support for a confidence vote very cheaply.”

Markets Stable

The extra yield that investors demand to own Spain’s 10-year government bonds over similar-maturity German debt was little changed at 104 basis points as of 4:04 p.m. Madrid time. Spain’s benchmark stock index, the Ibex 35, rose 1.1 percent, matching the gains across Europe.

The Socialist leader has been trying to rally support for an anti-Rajoy alliance since the acting prime minister lost his majority in December’s general election, but he’s struggled to bridge the ideological differences between anti-establishment group Podemos and the liberals of Ciudadanos, his most obvious allies. That impasse prompted a repeat election in June and could still lead to a third vote in December if parliament fails to choose a leader by the end of October.

The Socialist divisions broke open on Wednesday, when former Socialist Prime Minister Felipe Gonzalez accused Sanchez of lying over his political strategy and the day ended with rebel officials briefing reporters from the sidewalk outside the party’s Madrid headquarters after they’d been locked out of their offices.

Under Socialist party rules, the executive committee is automatically dissolved and the party leader ousted if more than half of the committee members resign. With three of the 38 seats vacant, the two factions are arguing over whether the 17 resignations are enough to topple Sanchez. The party ethics committee, which has the final say on how to apply the regulation, has refused a demand from the rebels to meet to rule on the issue.

Socialist Challenger

Susana Diaz, regional president in the Socialist stronghold of Andalusia, is emerging as the most likely successor to Sanchez in the longer term, hinting at a leadership bid earlier in the week. Still, Diaz will probably want to avoid taking the reins before the PP gets in, since the leader who stands aside to let Rajoy govern may be permanently tainted in the eyes of the party’s supporters.

“I think Felipe is in the abstention camp, I’m in the camp of voting against Mariano Rajoy and getting an alternative government -- but I’d like to know where Susana Diaz is,” said Sanchez in an interview with

As rival Socialist factions exchanged barbs in Madrid, the Catalan separatist movement launched a renewed push for independence from the regional assembly in Barcelona, with regional President Carles Puigdemont pledging to hold a referendum on secession next year.

The emergence of Catalan separatism since the Socialists last held office in 2011 has decimated the party’s base. Previous Socialist majorities were built upon its strong support in Catalonia and Andalusia, but the swing toward separatism in Spain’s biggest economic region has left Catalan Socialists struggling to carve out a new political space.

‘Perfect Storm’

In part because of the problems in Catalonia, Sanchez has posted the worst result in the Socialists’ history in both of the general elections he’s fought. The Socialists suffered further losses in regional elections in Galicia and Basque Country on Sunday, falling behind Podemos in both ballots, in a warning to the party of what it’s future might hold unless someone can steady the ship quickly.

“Such a crisis within the Socialists is a perfect storm that could allow Podemos to become the alternative to the People’s Party,” Orriols said. “It’s opening a new window of opportunity to move ahead with the transformation of the political arena.”

Over nine months of political gridlock, Sanchez has refused to support Rajoy, saying the prime minister’s alleged ties to a party corruption scandal make him unfit to lead the government. If he can survive until next week, that argument will be bolstered with a group of former PP officials due to stand trial in the National Court in Madrid, an event that will dominate the headlines for months. Rajoy has not been charged and denies any wrongdoing.

— With assistance by Rodrigo Orihuela, and Todd White

    Before it's here, it's on the Bloomberg Terminal.