Acting prime minister Mariano Rajoy came up six votes short in his attempt to build a coalition government, as expected in this corner.
Rajoy and his People’s Party (PP) worked out an agreement with Ciudadanos (Citizens), but the socialists (PSOE), the radical left Unidos Podemos (United We Can), and small separatist parties refused to go along. The margin was 180 to 170 against, with Rajoy needing 176 votes.
The result is Still No Government in Spain.
Spain’s political crisis deepened yet further on Wednesday when caretaker prime minister Mariano Rajoy failed to win the confidence of parliament in order to form a new government.
The result means that the stalemate which has left the country without a fully-fledged government stretches into a ninth month after general elections in December and June both failed to produce a conclusive result.
The country now faces the real possibility of a third general election in a year, unless Mr Rajoy or another candidate is able to conjure a parliamentary majority by the end of October. If the deadlock is not broken, the next election would fall on the highly inconvenient date of December 25.
The lack of a new government will also mean that a budget for 2017 cannot be passed, displeasing the European Commission, which has demanded fresh cuts to Spain’s public deficit.
PSOE leader Pedro Sánchez said he could not allow a government marked by “corruption, bad economic management and cutbacks” to remain in power. But Mr Sánchez has not outlined any plans for an alternative government after he failed to win a confidence vote in March when Podemos refused to join an agreement between PSOE and Ciudadanos.
What’s Next?
I expect king Felipe VI to apply pressure to PSOE and Podemos. In that regard, neither is likely to join a grand coalition. However, Sánchez may agree to abstain.
Abstention would allow a minority government to form, but such a government would not be very stable.
Should Felipe’s pressure fail, new elections become a near certainty.
In theory, PSOE, Podemos, and Ciudadanos could form a coalition, but Podemos is open to a Catalonia separatist referendum and Ciudadanos would never approve that platform.
Expect Resolution Soon
We will likely have a resolution within a week. By resolution, I mean we will know the final result: Minority government by abstention or new elections.
There is one additional possibility: Rajoy steps down. The price of a grand coalition with PSOE could conceivably be Rajoy stepping aside.
If new elections are in the cards, I suspect political forces will find a way to not have them on Christmas.
Mike “Mish” Shedlock
I wish election anomalies could produce no government in America. That might be the solution to fixing our domestic problems. The Spaniards were smart. Maybe our founding fathers should have consulted with Spain prior to creating our Law of the Land. It would be practically impossible to switch gears now. Why would Congress want to make things better when they and their friends are making money hand over fist with crony capitalism?
No matter who wins, they are all in the same boat of debt and the EU has more comtrol over their fate than any political party in Spain. How many life boats are aboard? Muslims 1st instead of women amd children this time?
Lower yields on the debt of course!
Off topic: Mish if u have read it over on zero hedge what do u think of the article “If the fed doesn’t restart QE, a yield curve inversion (& economic dislocation) is imminent?
I did not read that article – but would be inclined to disagree
However, if the Fed hikes twice, I would expect inversion somewhere on the curve.
Once could conceivably do it.
No crystal ball here, and normally a twist guy, but at back this low, if front goes up I would kind of expect a curve shift up in the back for a while. Gun to my head I think curve doesn’t really invert until it’s above 3% at lowest. Maybe the front kinks a bit at first since rates have been so low soo long, but I’m guessing a flat curve at 3-3.5%
With that said, now I’ll have to watch. Damn!
“The lack of a new government will also mean that a budget for 2017 cannot be passed, displeasing the European Commission, which has demanded fresh cuts to Spain’s public deficit.”
As long as Spain is in the EU, staying deadlocked and not forming a new government until 2019 or 2020 is a smart strategy. Otherwise austerity and EU fines, which will not be popular. With self-rule and without EU disincentives, dysfunction would no longer be a rational response. Spain needs a Marvel Comics Superhero, not a monarchy.