Incumbent prime minister, Mariano Rajoy declined an invitation from the King of Spain to form a government.
Although Rajoy’s center-right “People’s Party” received the most votes in the last election, Rajoy could not foster a majority, even in a coalition.
The next chance to form a government goes to socialist Pedro Sánchez, head of PSOE.
The Wall Street Journal has additional details in King of Spain Asks Socialist Party Leader to Form Government.
Spain’s king asked the Socialist leader to try forming a government, but the push to break the impasse from December’s inconclusive election faces obstacles inside the party as well as outside.
Mr. Rajoy, whose conservative Popular Party won the most seats in parliament but lost its majority, had declined an invitation from the king to try to form a government, saying he lacked sufficient support from other parties.
Mr. Sánchez accepted the charge, pledging to create “progressive” government that would focus on unemployment, economic inequality, corruption and the secessionist movement in the wealthy Catalonia region. Socialist party officials said negotiations could take up to a month.
Mr. Sánchez insisted he wouldn’t seek to be prime minister “at any cost” and would spurn any agreement that might open the door to Catalan secession. He surprised the meeting with a plan to allow rank-and-file members to vote on any electoral alliance.
After his meeting with the king, Mr. Sanchez said he had been the target of “rudeness and arrogance” from Mr. Iglesias, but was willing to work with him in the interest of ending four years of conservative rule. Mr. Sánchez said the ball was in Mr. Iglesias’s court.
Mr. Rajoy lashed out at Mr. Sánchez for refusing to discuss a coalition government of the Popular Party, the Socialists and the centrist Ciudadanos party.
Mr. Sánchez later attacked Mr. Rajoy for shirking the challenge of forming a government. “The Popular Party has renounced the job for which seven million Spaniards had given it its vote,” he said. Mr. Rajoy said he still held out hope for heading the next government.
Bitterness and Acrimony
As you can clearly see, bitterness and acrimony has set in.
I fail to see the alleged “rudeness and arrogance” from Podemos leader Pablo Iglesias.
Actually, Iglesias reached out to Sanchez, offering him the right to be prime minister in a coalition. Reader Bran who lives in Spain commented “Sanchez’s first reaction was a cautious welcome, saying ‘Voters would not understand if I and Podemos did not understand each other’.”
That offer turned into “rudeness and arrogance” when the former head of PSOE blasted the deal.
I wrote about this on Saturday in Rajoy Says Leftist Parties Causing “Terror in Europe” as Spanish Government About to Fall
Where We Stand
This could be Sanchez’s best chance to lead because a new poll shows Podemos would gain mightily at the expense of PSOE in a new election.
The above chart from El Economista, with translations and vote totals by Mish.
Podemos Poised to Surge
Were those projections to hold, Podemos plus PSOE would be very close to an outright majority. Although PP would pick up seats, a PP coalition with the Citizen’s Party would fall further behind than now.
Iglesias offered to take a second in command position to Sánchez, but if new elections are held, which is increasingly likely, Iglesias may insist on the top spot. Either way, coalition problems remain.
Problems Facing Leftist Coalition
- PSOE insists Catalonia stay united with Spain
- Podemos is open to Catalan elections
- The third group of fringe parties needed to form a coalition demand Catalonia independence
Point number 3 may drop off in new elections. Yet, huge problems face any leader even if a coalition can come up with the required 176 seats.
Whoever wants to lead has some big fences to mend.
Mike “Mish” Shedlock
Where are all the regular comment writers ?
This is a test [for me] to familiarize myself with Mish’s new website. I must say that it does look better than his previous website.
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Basques and Calalonia demand independence from the blood suckers of Madrid. Basques and Catalonia are hard working productive people. The socialists have no other people’s money for free stuff if the working people achieve independence.
Madrid culture was honed on slavery and silver mines in South America five hundred years ago. Work does not fit he hands of Madrid.
You could as well had argued that Hitler wanted to put an end to the ‘blood-sucking’ of Germany by the Jews. The problem of nationalities in Spain is a complex not simplistic one. In part it reflects a historical weakness of the central government (just take a look at the Catalan and Basque regions in France). In part, it reflects the tribal mentality of Spaniards. The leftist tribe never really accepted the defeat of Stalinism by Franco, and regional nationalists were found to be useful allies to gain power, formerly against the dictator and subsequently within the new democratic regime.
Economics are least relevant here. It is a problem of power. In the last 40 years, central power has ended up being largely distributed among the regions, which has fostered the tribal and narrow-minded stance of Spaniards. Unsurprisingly, leftists tend to be the great beneficiaries of the confusion. They are always the best at propaganda, education in Spain is at its lowest level, and Mr. Rajoy is favouring far-left Podemos to weaken the Socialist party (just as Mr. Mitterrand did in the 80s with the Front National). In my view, all of this is suicidal, and the outcome is far from clear, but it wouldn’t surprise me to see a second Yugoslavia in Southern Europe soon.
I’ll return to the theme of finance on this. Local and regional finance was under strict control of the traditional banking barons and central bank up until the euro, it kept a real check on the distribution of power. Spain took twenty years to form a working model with a future, and then sold it all for the euro. The boom flood of regional income was seen as a right and proof of local authority, it was used to expand regional governance. When the reverse came it was Madrid that was held hostage to poor regional accounting, it both had to bail out regional debt while installing regional spending restrictions to justify its own necessary guarantee/deficit, something that drew hostility regionally – many regions had grown to think they ‘owned it’ without having been subject to the full market. Even ZP seemed incredulous as finance closed in on his country.
So that is where it lies, regional differences amplified by recent monetary empowerment and civilian economic discontent, the blatant corruption and backtracking of the PP doing no favours to national identity either.
The politics of the country are pretty much a lagging indicator as to how reality is at ground level, there is no leadership anymore – something of a monetary phenomenon.
I fail to see the effect of the euro in all of this. The process of power dispersion in Spain has gone unchecked since the present Constitution entered into force in the last 70s. Since the first parliamentary elections, the regional nationalist parties have held the balance of power, so none of the two main parties could form a stable government without them. In exchange, they have been given ever more power, to a point where a formally federal Spain could not conceivably be more decentralized than it is now. Furthermore, in a few but crucial occasions the Catalan regional government has deliberately failed to enforce national laws, with no response whatsoever from the central Government. This has nothing to do with economics or finances. It is basically a matter of political power.
In the Basque region, nationalist terrorism has compounded the problem, and its constituency now has a sizable number of elected representatives at the municipal and regional level. No Spanish region would be able to survive as an independent State, much less as an independent Marxist State, but that will not stop them anyway.
Well if I remember 96 and 2004 elections were those that did not leave an absolute majority to PP or PSOE , and only the 96 elections saw the formation tempered by regional influence. Then the PSOE and PP both fell flat at the first hurdle (2011 and 2015) with regional and local ( Podemos is something of grass roots left state + regional mixture) power not only at their heels but a force to be reckoned with. Read it as you will, from where I sit the euro both corrupted and tied the hands of the traditional parties while facilitating the alternatives.
I’m not an economist, but I still fail to see the influence of the euro on the rise of regional nationalist power. The socialist party has always been lenient towards those parties because that was part of the ‘progressive’ package. Both Aznar and Rajoy felt forced to count on them, and by now any mere thought of opposing regional nationalism is considered as a Francoist aberration. Fear of the Francoist anathema has steadily pushed the PP to the pragmatic left where it stands now. You might agree that their main motive is to keep their corruption under cover–which exactly matches the PSOE’s motive–, but corruption in Spain is deeply ingrained in the society as a whole.
As to Podemos, I wish you were right, but I would rather describe them as a melting pot of academic Marxists, young illiterate voters and leftist well-to-do dilettanti. A melting pot that could easily become a Molotov cocktail.
When the Euro was instituted back in ’99-’00, ‘developing regions’ around Europe experienced a boom – lots of public infrastructure grants & private investment (mostly from DE/NL). Regional leaders/gov’t benefited because the man-on-the-street could see&touch the positive changes… new roads, more jobs, etc.
When the Euro federalism formula turned sour, Madrid (not the regional leadership/gov’t) took the heat – that is how the FedEuro & regionalism plays out… local gov’t accepted the early (unearned) credit, and Madrid took the later (unearned) criticism.
The Greeks see the situation more clearly (never fooling themselves that Athens or local gov’t was responsible for much of anything, good or bad), and turned their anger towards Brussels/ECB.
The Irish chose to blame themselves, and they’ll probably suffer through slow-but-severe, multi-generational economic regression.
Mpower 1969 understands it I think .
Look at it this way maybe :
Before the euro there was one bank , the bank of Spain . They controlled lending to the regions via local and national banks . No one from outside of Spain was much buying Catalan debt , or Andaluz debt etc. – the government, via the central bank and policy ability, could write off any encroachment, x rate was always a factor too , any encroachment would have been a sort of invasion in fact … you imagine a Brussels hedge fund financing the Catalan region previously ?
With the euro the door was thrown open , interbank lending , availability of funding became EU zoned , and wider even with the stability the Euro was supposed to represent . Interest rates were set way low , the real estate boom and local and national revenue jumps occurred , along with all the pet projects we know of , along with a large increase in administrative spending .
When the crisis arrived ZP increased spending as a counter cycle , your plan-e etc. ,he decided to fold as yields started to soar and he received a few curt letters from Trichet , he introduced cuts and was thrown out .
Rajoy promised what he wanted and then after election fitted in to the dictate , VAT rises and the rest . He was thrown out .
So Spanish national debt to GDP went from something around 40% up to near 100% now … and has resolved nothing – it bought time . The latest pre-election game of spending is fading fast . Rajoy prided over not having submitted to Troika , he managed a loan that had few obvious strings attached BUT ..
Spain’s mountain of debt has been returned from international institutions to national ones – if yields rise or Spain goes bankrupt the pressure/cost is on Spain . You are talking a lot of money and Spain’s place in ‘Europe’ – sure the PP and PSOE are in on that . Luckily they have a Draghi , some say they do not need a government here (judging by post election yields) , all they need is a Draghi . Where Draghi (and Brussels) give , they can also take away . In other words they hold the key to policy of low rates and bargain it for reforms – political leverage . Nothing new there really .
However the central government has had to soak up the spoils of the crisis . Regional bailouts , covering outstanding regional and local debt , guaranteeing new debt , guaranteeing failed banking assets and mergers .. and more … it has all landed on the plate of central government . Why ? If a region declares bankruptcy down comes the house of cards , probably Spain’s financial position as well . In other words any region that feels something hostile towards the central government can hand it chaos on a plate – not only that but has access to Euro funding from outside of Spain if it so suits a foreign power or bank , and without Spain being able to mutter ‘heeey’ . Ask why France is buying up the Catalan rail network … there are many similar deals .
So what this adds up to is Rajoy or whoever is sat in the top seat, having to impose restrictions on spending on the regions (not by restricting borrowing as when they owned the banks , now they ask for budget cuts and raised taxes etc.) . That causes resentments , and any region that is so inclined , and that has built up its own local status/size during the boom , may turn round and threaten the whole show knowing both that Spain as a country will lose more, and knowing that it has an opportunity within the European financial system of making a break for it .
In the meantime the Spanish as a whole are eating their losses , the household debt to GDP maxed out during the boom , the Spanish public are paying for losses in the Sareb and bank guarantees , they are paying for the overspending as a whole , for regional debt … well you know the show and the discontent … I had hoped ZP or Rajoy would have turned on the euro . Not , but instead the population have turned on them , the regions as well , whether Podemos (and yes I was being polite describing them) actually rejects the euro or is heading to a Tsipras event , or wants to push the print button in Frankfurt or Madrid is almost besides the point – many people want the change and the traditional parties have blown their positions at the cost of those many people .
So I hope you understand somehow in all of that (and I could go on and on in greater detail) , how Spain has been turned on itself due to the choice of the recent governments playing the ‘no default no exit’ game on the back of the average citizen . As a whole it makes Spain look weak though when viewed from a common level – rearranging the furniture to suit Europe … where is Spain in that ? Begging.
The Catalan independence/republican movement , Podemos being S.American affiliated in various ways , French socialism, go hand in hand .
Next stop is probably a Greek event of some kind , as more EU demands are just around the corner . There is not much left to pretend and a little technical dibbling is not going to solve a whole lot either , and is more likely to be met by protest at a higher level than/with the street ones, courtesy of Podemos .
We will have to hope that history doesn’t repeat itself.
What if they fail? Socialists?
Of course they’ll fail… silly question.
Test
This is a much cleaner layout.
Spain has been under a threat of fracturing for a long time. Its financial problems started with real estate and were not as severe as the rest of the EU but Spain failed to fix it when they could have and thus they have joined the party.
Regional splits make forming a coalition government difficult.
Parliamentary Democracies can be as undemocratic as banker controlled Republics and a lot more difficult to analyze.