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Spain May Need Second Election After Anti-Austerity Party Scores Big At Ballot Box
“Today sees the start of a new political era,” Podemos leader Pablo Iglesias told supporters gathered in Madrid after Sunday’s largely inconclusive elections in Spain. “The forces of change are making a historic advance.”
Iglesias is certainly correct that things have changed. Spain’s three-decade old political duopoly was toppled over the weekend with PP and PSOE garnering their lowest combined share of the vote since the eighties.
Iglesias’ Podemos - the anti-austerity party that many equate with Syriza - polled stronger than expected, winning 69 seats in Parliament and 21% of the vote. Here’s a look at the results compared to projections:
Needless to say, this is bad news for Brussels and bad news for markets (at least in the short-term). The fragmented outcome means the coalition building process will be arduous to say the least and that means the process will be plagued with uncertainty. The worst possible scenario from Berlin’s perspective would be for Spain to go the way of Portugal - that is, with a left-of-center alliance moving to topple the PM. Admittedly that outcome looks less than likely here, but as Deutsche Bank puts it, “there is no obvious solution” in terms of forming a stable government. Here’s a look at several possible coalitions:
Below, find some commentary from sellside desks that underscores just how convoluted the situation has become followed by some additional color from our end.
* * *
From Deutsche Bank
1) A PP and PSOE grand coalition: numerically strong, politically unlikely
A grand coalition would have a large majority (213 seats). However, such a grand coalition would be unprecedented in Spain. We can draw a comparison with Greece rather than Germany. Politically, but not economically, there are several similarities. After the dictatorship Greece was dominated by two parties, the centre-right New Democracy and centre-left PASOK from 1977 to 2012. But since 2011 PASOK suffered the emergency of radical-left SYRIZA as the country battled through the debt crisis. In the June 2012 general election, PASOK won just 12.3% of the votes versus 43.9% in 2009. The government alliance with centre-right New Democracy further damaged the centre-left party. Last September PASOK obtained just 6.3% of the votes.
We think PSOE will keep in mind what happened to the centre-left in Greece. Their incentive in formation a coalition with PP would be to avoid a new election given the recent positive momentum of Podemos. A change of leadership in PSOE could also bring a less confrontational relationship between the two traditional Spanish parties. Still, we think that via such a coalition the PSOE would run a greater risk of losing further votes than returning to elections in the short term. Hence, a PP-PSOE coalition could become feasible only when the other options are exhausted. Were a grand coalition to be formed, the two parties would struggle to agree on material structural reforms.
2) A Citizens-PSOE-Podemos “alliance”
In theory, a Citizens-PSOE-Podemos coalition would have a large majority. That said, such a coalition would probably damage Citizens as its electorate comes largely from previous centre-right voters. Indeed, after the May regional election support for Citizens in polls temporarily dropped. We think this was due to a disappointment of centre-right voters who either abstained or switched from the PP to Citizens but then saw the left gaining control of several local governments.
Even if we are wrong, we do not think that such a heterogeneous coalition would be stable. We are also concerned that the government would struggle to successfully tackle Spain’s challenges of lowering unemployment while reducing the large net external debt. While, we do not see Citizens supporting policies such as a reversal of the labour market reform, the three parties could target a material slowdown in the fiscal consolidation, with significant risk of fiscal slippage.
3) Stalemate and a second general election
There no obvious solution in our view. This is why we think that a second election around March 2016 is as likely as any of the above two alternatives. Indeed, we do not feel that we have enough elements to conclude which of three alternatives – grand-coalition, a tripartite agreement or a new election – is the most likely. That said, even if a new government is formed we doubt it would last the full legislature. An early election in the short or medium term seems the most likely outcome. Still a new round of election would not necessarily guarantee a solution.
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From UBS
The provisional overnight result from the Spanish parliamentary elections suggests that Partido Popular, led by Mr. Rajoy, has won the election with 123 seats (29% of the vote). However, the number of seats is not sufficient in the 350-member parliament to form a majority government – not even with the support of Ciudadanos, the newly- formed centrist party, which has secured 40 seats (14% of the vote). A potential alliance between PSOE and Podemos, including the regional parties (ERC…), may afford the larger majority, which may form the new government.
The outcome is highly uncertain
The new parliament will be formed on 14 January 2016 and will have up to two months to elect the new government. Negotiations will be necessary since PSOE and Podemos would need the support of the local regional parties to form a government. Ciudadanos has stated recently that it would not support the other minority parties. A “German style” coalition PP-PSOE is possible but seems unlikely as there are no precedents. Therefore, at the moment, a coalition between PSOE, Podemos and the regional parties seems the most likely outcome to us but could be somewhat unstable.
Instability not discounted; possible retreat on reforms, less budget control
With the election outcome unexpected relative to the latest polls and despite the possibility of the formation of a stable government in the future, we think this scenario is not fully discounted by the market. Consequently, we expect debt and equity markets to react unfavourably. The near-term bond market reaction is likely to consist of a widening of 10-year yield spreads by as much as 30bp or more. However, we would view this as a likely buying opportunity over the medium/long term.
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From Goldman
In our preview of the elections, we expected a minority (centre-right) PP government that gained support from the centrist Ciudadanos party. While PP gained the expected level of support, Ciudadanos gained less support than we had expected. Taken together the two parties fall significantly short of a majority (163 versus 176 required). While the PP will try to form a government first and there are other right-of-centre parties in Congress these are regional nationalist parties. For historical reasons, these parties are by no means natural allies of the PP. Mr Rajoy has acknowledged that forming a stable government will not be easy.
Relative to most polls and our own views, Podemos exceeded expectations and Ciudadanos fell short. The two established parties did broadly as expected. But the surprises in terms of Podemos and Ciudadanos change the arithmetic of the parliament quite significantly.
The most feasible coalitions are insufficient to deliver a majority
We do not believe a 'grand coalition' of the centre-right PP and centre-left PSOE is likely. Ahead of the election, Ciudadanos also indicated that it would find it difficult to form a coalition with Podemos. It is possible that some of that resistance changes after the election - especially one that leaves the country struggling to form a government. Yet we continue to believe these outcomes are unlikely to deliver a stable coalition.
A coalition between PSOE and Podemos has already emerged in some municipalities. They share anti-austerity views and are opposed to market-oriented reforms, although earlier momentum behind these in Spain had already waned ahead of the election. Yet these two parties will require further support from several other regional parties, including those on the right of centre, to deliver a majority. Regional nationalist parties, including those on the right of centre, are more natural allies of PSOE and Podemos than of the PP with PSOE and Podemos is more inclined to grant additional powers to the regions. Given these changes, it is worth recalling that politics in Spain remains strongly pro-European and yesterday's election result has not changed that.
Overall, we conclude that reaching a coalition agreement will be difficult since it will require parties with significantly different political views to set those aside. Any coalition seems prone to instability as and when it needs to respond to unforeseen events. This raises the likelihood of repeat elections, although these cannot be held within two months of yesterday's election.
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From Barclays
The bottom line is that there is no obvious alliance that would add up to the 176 seats needed for an absolute majority in the 350-seat Parliament.
A PP-PSOE alliance is highly unlikely based on the statements by the leaders of the two largest parties.
PP and Ciudadanos would get 163 seats, and PSOE and Ciudadanos would get 130.
PSOE and Podemos would get 159 seats.
Ciudadanos has ruled out joining Podemos in any multi-party alliance.
As for the rest of the parties, practically all are nationalist parties from either Catalonia or the Basque Country, which makes them unlikely coalition partners for either PP or PSOE:
ERC: 9 MPs (Catalonia, leftist party, pro-independence).
DL: 8 MPs (Catalonia, conservative party, pro-independence).
PNV: 6 MPs (Basque Country, conservative)
IU: 2 MPs (radical-left party).
Bildu: 2 MPs (Basque Country, radical -left, pro-independence).
CCA: 1 MP (Canary Islands).
What are the next steps?
1. The new parliament will be formed on 13 January 2016.
2. PP will get the first chance to form a government and will submit its proposal to a vote by the parliament. If it does not get an absolute majority of MPs (at least 176 MPs), which seems highly likely, then two days later there would be a second vote where a simple majority would suffice. If PP fails to win support, then PSOE would get the opportunity to form government, following a similar procedure to the one described above.
3. Following the first vote in parliament, the government approval process cannot take more than two months. If no government is approved within two months, the parliament would be dissolved and new elections would need to be held.
* * *
Meanwhile, as political analysts struggle to predict what comes next, the market has already rendered its judgement. Spanish 10s and 30s opened sharply lower as yields spiked 11 and 10 bps, respectively. SPGBs subsequently recovered, but the message is clear: the market, as always, hates uncertainty and this is a highly uncertain situation.
For their part, JP Morgan recommends you stay short Spanish 5s versus Italian govies and Danske is out with a similar call. Additionally, it's worth noting that ECB QE pauses tomorrow and won't resume until January, which could put more pressure on EU government debt (of course if Podemos were to end up holding sway over Spanish politics, PSPP purchases of SPGBs might just end up "pausing" permanently).
Above we said that the nightmare scenario for Brussels and Berlin would be for a left-of-center coalition to topple the Rajoy government. While that would be decidedly bad for pro-austerity eurocrats there's actually a worse outcome: a second election that sees Podemos win outright. On that note, we'll close with the following from Pablo Iglesias:
"Neither actively or passively will Podemos allow the People’s Party to govern. We'd be well placed if new elections held."
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Anti-Austerity Party
The "screw paying our bills" party.
The government requires another election that can be properly rigged.
Enough already with this "anti-austerity" shit. Get over it, there is no credible "anti-austerity" movement anywhere in Europe. Like Tsipras, they all eventually capitulate and join the "there is no altrenative" chorus. Some capitulate even before they get into office, Iglesias is one of those. Pay attention to his statemnet right after the Spanish election result. He may even consdier a coallition with Rahoy. Puked yet?
There will be no change in Europe or anywhere unless people get de-zombified, something which looks highly unlikely with each and every passing day.
Just look at Spain, Rahoy rammed austerity down Spanish throats and was up to his eyeballs in corruption and, although clearly losing ground, he ends up as the leading party. Or look at Greece, where the traitor Tsipras did an 180 on everything he promised and rammed a vicious third austerity program down Greek throats while selling off all the country's assests and he still leads in all the popularity polls. People have been zambified.....PERIOD.
this issue has two sides. on one side it's people for more debt, i.e. more spending in excess of taxes... and on the other side people that are for... balanced budgets
which means as much state spending as taxes are collected... I would call that a simple concept that should not be too hard neither for politicos nor for voters
I see that you call one side "zombified"... well, here we lurch... brains! braaaainnnns!
It's not a simple concept, and just because you simplified it in your own mind so that you can wrap your head around it, but at the same time missing to consider vital points, doesn't make it simple.
Take Greece for example, the country's situation of which you commented hundreds of times. You and many others are still hanging on to believing the myth that Greece spent beyond it's means. You know, as in the state spending more than it collects in taxes (aka not balancing the budget). On the surface that is clearly true but the question one must ask, and one I have never seen any evidence form your posts that you even considered, is WHERE DID THE MONEY GO?
Social program spending in Greece on a per capita basis is about avearge for the EU. Military spending is NOT, far exceeding anyone else. THAT'S WHERE THE MONEY WENT because that's where politicians can milk the greatest kick-backs.
So it's not just a simple concept of balancing or not balancing the budget, it's a lot more than that and unless people understand that they are getting screwed and take action against systemic corruption (dezombified), the connected money, the 1%, will prosper while the 99% will be asked to pay the bill.
Holy cow, I can't actually believe that someone has posted this on ZH. Thank you!
the money goes somewhere. the whole thing about spending is that it's... gone, afterwards
and I don't care much where it went... as long as you only spend as much as you tax now. but that's the problem, isn't it?
the past is complicated as always, the future is even more puzzling, but please do not make me look at the present, and no...
... please have me pay later for what I want to spend now
Ghordius,
with his usual verbiage, wordplay, and obsfuscation.
"Future, past, puzzling, complicated",
but the key revealing phrase, "don't care where it went".
Yes, exactly, that is his basic plea, just "balance" the "budget".
As though the "budget" has magically appeared, and has not been
made by nor contrived
to amass fortunes and power to a few.
Just ignore the corruption, the militarism, the plutocrat rule,
and the rigged financial and political setup.
Victor Hugo et al be damned.
For Ghordius, from Greece to Ukraine,
the only thing he really "cares about" is defending the status quo
and its twisted rules and its self-serving arguments for
NATO "defense" and TROIKA "austerity".
How can you disagree with what he said???
Really?? You are that biased against his positions that when he makes a clear statement that anyone who is fiscally responsible should agree on you criticize it??
Let me break it down for it:
1) Balance the budget and don't run deficits.
2) Where the money from taxes is spent is a separate fight.
3) How the money is created is a separate fight.
4) Legal structures and treaties within the EU are a separate fight.
Contrary to what you and others at ZH contend,
the basic problem is NOT one of "balancing the budget".
The situation might be better understood by some
if a criminal gang were directly in charge of their personal budget,
instead of having a criminal syndicate indirectly in charge of their personal budget,
as is presently the case.
so basically you are saying that it's a criminal gang that does tax me... and so "it's ok" if they make debts in my (collective) name, payable in the future?
sorry, if it's extorsion, then I still prefer to pay the mafia gang now instead of later. it's cheaper, this way
A cynic and a Pollyanna do agree
on one thing for sure,
a belief "this is the best of all possible worlds".
If the medical profession were organized like Wall Street, doctors would be paid by undertakers.
back to basics
AMEN brother. It was German submarines, jets, tanks and other big tickets items for the Greek military with huge kick-backs.
Tell me. Did your ever see a Greek F16 shoot down a Turkish jet that "strayed" into it's airspace. Or the huge Greek navy circle Lebos and
turn back Turkish boats filled with migrants.
No I have not but they should have turned back the boats at least.
Given Turkey's modern history of aggression against the Greeks they would also be justified in shooting down Turkey's military planes that violate the Greek air space.
Ghordo, I'll be honest with you. I am for whatever side will destroy the EURO the fastest.
Which side is that, in your opinion?
difficult to say, to be frank. the question is if our darling beast can be slain at all, before it dies a natural death as all fiat money eventually does
I'd say you have to be on the side of the Petro-Dollar and the megabanks, just to be on the more aggressive side of the eur detractor's clubs
you'd have for sure to be on the side of those who think that the EU is the true newborn German third reich, for starters
perhaps Israel's side? jokes apart, I recently had a conversation where everybody was pointing at Israel. I know, boring, particularly here on ZH
it wasn't... unfriendly pointing, btw. Just an analysis of who had most against certain things connected to the eur and the eu in general and particular
*sigh* Ghordius, your blind but certainly not stupid... such a terrible combination.
open my eyes to your wisdom, then
>>>>>brains! braaaainnnns<<<<
Return of the Living Dead reference???
If so, awesome!!!
Americans, do you now see why having more than 2 parties is expensive and inefficient in getting the desired election outcome for a country's PTB? Aren't you glad you gave a highly effective 2 - party system?
Actually that's the people saying that they dont want to pay the debts forced on them by the bankster bought politicians and brussels bureaucrats.
This is just a re-run of Greece and more recently France.
What they really need is to vote in an anti-migration/EU party, but they will not do this because the Nazis in power have convinced the people that a vote for the 'extreme right' is a vote for Nazis.....you could not make it up!
The agenda continues on unabated......
http://beforeitsnews.com/conspiracy-theories/2015/12/as-events-spiral-ou...
PP won the elections and would need the 2nd PPOE to form a coalition, but they have annoucned they wont cooperate with PP, but with nr 3 Podemos
LOL, keep having elections until the results are what is required by the elite. seen this too many times before. a farce wrapped in corruption by evil men.
it's the constitution that requires new elections if no workable majority in parliament can set up what we call a cabinet or government, and you call an administration
Ghordius, seems like the spanish voters don;'t like any of them ..the vote is clear: we hate them all. and that is what the msm and elite do not want reflected in spanish .gov..for the children of course..
ten political parties got elected and have seats in parliament. ten political parties. with the one that got the most votes and seats the incumbent, PM's party
if Spain had the electoral system that your country has, it would count as a great victory for Rajoy, wouldn't it? oh, and a full majority in a congress, and Rajoy Prez
Ghordius, where we disagree, is not what your EU system or what our American system of government's structure might be..it is more:
I see the whole western world's government systems as : corrupt, a crime in progress, you do not.
of course everything is corrupt, particularly if humans touch it. the question is how much. the second one... what is your alternative
revolution: the overthrow of the lovers of wealth and power.
http://www.dailymotion.com/video/x1ptiu_beatles-revolution_music
Not even close.
Spain, like most European countries has a proportional representation electoral system. Typically no one party can ever get a "majority" and there are typically a dozen different parties elected and represented in parliament.
"The worst possible scenario from Berlin’s perspective would be for Spain to go the way of Portugal - that is, with a left-of-center alliance moving to topple the PM"
contentious, and firmly wedded to the meme that it's Berlin, i.e. Germany that is alone with certain policies
Rajoy's PP, the Spanish conservatives are as much for this particular set of policies the author is alluding to as Merkel's CDU/CSU alliance
the party group in the EU Parliament is the EPP, to which all three parties belong. fiscal conservatives to boot, and so for balanced budgets... which is the opposite of what "Podemos" wants
but the meme cherished by some media is that "eurozoner conservatives are socialists"
Keep the elections going till Goldman Sachs can pick a winner? Sounds about right!
The obvious solution is for the EU Commission to ban Podemos as a terrorist organisation, and I wouldn't put it past the motherfuckers.
bring in the Diebold! will be the cry of elite pols, bring in the diebold for fair elections everywhere.
and... you should really know a bit better then that. but you actually do, don't you? every time you accuse the eu commission of or with such fantasies, you take up space that could be better spent to critizes it properly
The Rajoy.gov didn't practice austerity but claimed it did.
A Podemos.gov would not practice austerity and will admit it, if Spaniards are lucky.
Either way, austerity will not be practiced and sovereign debt will rise.
Same as in the UK and just about all other EU.govs. US is no different.
Only solution: "The Big Reset"
They can keep this up as long as they have negative real interest rates on the debt. The question is how long can that farce be continued, it could be for a very long time.
The real issue isnt Austerity, the real issue is structural reforms to make the Spain (the EU) competitive. As in Greece it wont happen. Retirement in your 50s, massive social safety net, it wont go away. Rajoy will at least talk about it to satisfy the German people the others wont. That is the only difference....
Yep. When interest rates rise into positive territory, sovereign debt becomes unrepayable and the country blows up. As you say that could be a long time because even with Zirp and Nirp, there is still little borrowing or growth.
as a reminder, the usual reason why Other People discuss this kind of things on financial blogs... is because the usual sovereign debt is public and international
and so "Mr. Market's" affair, too. meanwhile, if Spain can afford to pay for this "massive social safety net" with the taxes Spain gathers... well, then less so
in short, Mr. Market needs bonds in his hands in order to give advice on how to run things to a government of a sovereign country
smacker: "Same as in the UK and just about all other EU.govs. US is no different". keep that thought, cherish it and don't ever look at numbers
Unfortunately, the EU (with possible exception Germany) is confronted with immense structural problems- stagnant/declining economies, high unemployment coupled with anemic job growth and exploding deficits. These problems have been significantly exacerbated by US/NATO sanctions on Russia and the US sponsored coup in Ukraine, an economic basket case, being run by Oligarchs and neofascists. What exactly is this election in Spain going to accomplish? Given the current political/economic organization of the EU, people in Spain (as well as Portugal, Italy and France) can look to Greece as a model for what is instore for them- continuing austerity, high unemployment, gutting of pensions and other social benefits, in short a continuing decline in their standard of living. Not a very pretty picture.
phillyguy," continuing austerity, high unemployment, gutting of pensions and other social benefits, in short a continuing decline in their standard of living. Not a very pretty picture. "
what don't you like your peas?
look to detroit for our american model or is it Puerto Rico??
" if you don't like your election results, you don't have to keep them."
I really wonder how much longer the Great Contraction can be denied. Almost every economic indicator is trending downward, yet extend and pretend continues. How long before governments collapse?
Run elections until the "right" candidate is elected.
LOL, probably what will happen in the US if Trump gets elected.
Austerity is a big lie. In double speak it means that funds are shifted from social spending into the hands of elites to back up bondolders and debt that they hold.
Since rich don't pay taxes that means all burden of DEBT repayment falls on lower income strata: the rcih are literally having their cake and eat it too.
the system: at one time long long ago, you buy debt you take risk..
the risk takers today are never allowed to fail, but the change over time was WHO takes the risk..not some trader, but the non controlling public via the CB such as the FED and the tie in to tax structure.
dead broke banks backstopped by fiat money back stopped by: why ,joe shmoe of kokomo.
if you are lucky to be close to the spigot of cb funny money you do very very well indeed..lucky fuckers.
The only coalition I see is PSOE+Podemos+IU+ERC+DL+Bildu
Which requires -
a promise to veto sanctions against Russia next summer (to win Podemos and IU and provides an economic boost via Russian tourism)
and
a promise of maximal regional autonomy for Catalunya and País Vasco within a Spanish Federation (complete independence would lose their votes in Madrid).
Whether PSOE can stomach all that or prefers to go the way of PSOK instead remains to be seen.
thats what someone called coalition of losers. The PSOE will have to choose if they want to continue supporting separatist parties on a never-ending concesion run that it's been going on for 30 years or put an end to the forces that threaten to rip apart Spain once and for all.
You can not get into any position on the administration in this regions unless you learn the language, (not spanish!) and yet there are toon of nationalists (or should i say separatist) that complain about not having enough rights and freedoms (namely right to collect taxes and spend them as they wish and running referendums or having national football teams).
What ever happened to Greece?
They went through this same type of shit a few months ago - but they just stopped being front page news - why?
they accepted the troika austerity cuts in exchange for... more debt to repay the debt...
Just when Argentina is entering "Austerity" in this never ending circus in which the only winners are its owners, of course. No more Nation States my friends. Just corporate follie! (The circus' CEOs: Politicians).
By now the European Union has perfected the technique: hold election after election till the people get their cue and elect the 'right' party!
Amusing and depressing how people are being manipulated. The day is not far when this farce of 'elected democracy' will also be scraped, and the plutocracy-run-bureaucracy will show its true face of dictatorship of the 0.1%... A first step would be to make everybody indebted way beyond their capacity by loaning them fiat money... At some stage, all of them will be bankrupt, trying to repay the money the banks have created out of thin air. Then they wont be bothered by silly details like who is the Prime Minister, etc.