Spanish Election Ends With Hung Parliament, Forming New Government "Could Prove Challenging"

Spain's ruling socialist party led by prime minister Pedro Sanchez is set to regain control with his left-leaning allies close to a majority following Sunday's vote for Spain's Congress of Deputies, although based on most all of the votes counted, he would need a handful of votes from Catalan separatists, which may prove to be problematic.

According to Goldman Sachs, based on a projections of votes counted by 11:45 pm BST (roughly 99.8% of the sections where votes have been collected for Congress and about 89% for the Senate) point to a hung Parliament, in line with indications from opinion and exit polls. In other words, as expected no party has won enough votes to form a government on its own. The Socialist Party (PSOE) is projected to be the party with the highest share of seats in Parliament. And while Goldman expects that it will take time for a new government to be put in place, a center-left coalition led by PSOE is likely to emerge as a government, potentially with the support of a moderate group of Basque separatists.

As Bloomberg adds, the ruling Socialists are on track to win 123 seats, up from 85 in 2016. Its left-wing ally Podemos platform has another 42 seats while the Basque Nationalists, another group close to Sanchez, has six. That would give Sanchez 171 seats, just shy of the 176 he would need for a majority. The moderate Catalan separatist group Esquerra Republicana has another 15 seats and has signaled its willing to help. This could give the 47-year-old premier a shot at forming Spain’s first stable government in almost four years and enable him to chart a way forward for the country after years of economic crisis and political turmoil.

It will mean a government in Madrid that seeks conciliation rather than confrontation with the separatists controlling Catalonia and will make him the standard bearer for social democracy in Europe

Notably, a second Sanchez government would reverse the trend of a collapse in voter support for Europe’s other center-left parties. He achieved this by boosting the minimum wage and pension payments while remaining committed to spending within the fiscal limits set by the European Union. While Sanchez had already served 10 months as the head of a minority government, he was forced to call a snap election when he failed to pass his budget.

Also of note: a new nationalist party has emerged "to motivate supporters, who have historically been less reliable than voters on the right" according to Bloomberg. Vox is set to win seats in parliament for the first time, but its 24 seats suggest it’s set to fall short of expectations and the huge buzz around their sudden emergence on the political scene. Vox’s parliamentary presence will mean Spain is no longer exempt from the right-wing populism that’s swept across Europe and the U.S. But unlike Italy and some other European nations, Spain remains a particularly enthusiastic member of the European Union. Not even Vox is suggesting pulling out.

The traditional conservative group, the People’s Party, lost about half its seats and will have 67 deputies in the new parliament.

Vote Highlights via Goldman:

On 28 April, all 350 seats in the Spanish Congress of Deputies were up for election, as well as 208 of the 266 seats in the Spanish Senate. According to projections based on votes counted by 11.45 pm BST, the allocation of seats in Congress is as follows:

  • Socialist Party (PSOE) - centre-left: 123 seats (28.7% of votes)
  • People’s Party (PP) - centre-right: 66 seats (16.7% of votes)
  • Ciudadanos party - liberal: 57 seats (15.8% of votes)
  • Unidos Podemos - left-leaning: 42 seats (14.3% of votes)
  • Vox - right-leaning: 24 seats (10.3% of votes)
  • Small regional parties: 38 seats (14.2% of votes).

1. The general election has delivered a hung Congress, with no party winning an absolute majority of seats. About 89% of votes have been counted for the Senate, and projections show that PSOE has a majority of seats (122 seats out of 208). A coalition government is likely to emerge but only after lengthy negotiations among political parties, which will likely start only after the regional and European elections on May 26. Forming a government could prove challenging given how fragmented Congress is.

2. A centre-left coalition of PSOE, Unidos Podemos and regional nationalist parties from the Basque Country, Valencia, the Canary Islands and Catalonia (including the separatist Catalan Republican Left, ERC and Catalan European Democratic Party, PdeCAT), would have the strongest majority in Congress, controlling 199 seats, of which 123 seats would be held by PSOE, 42 by Unidos Podemos and 34 by regional parties (of which 10 are from regional non-separatist parties, and 24 from separatist parties). But, it could prove challenging to form such a government, since regional nationalist parties, which did not vote in favour of the government budget in March causing the government's collapse, would play a critical role in the coalition.

3. Two other possible coalitions would not have the majority of seats in Congress (176) needed to form a majority government. A centre-left coalition of PSOE and Unidos Podemos would have 165 seats and a centre-right coalition government formed by PP, Ciudadanos and Vox would have 147 seats. Finally, the centre-left coalition of PSOE and Ciudadanos would have an absolute majority of seats in Congress (180 seats), but, so far, Ciudadanos has denied the potential for such a coalition because of differences with PSOE over how to confront the separatist movement in Catalonia.

4. Given the fragmentation in Congress, the possibility of a minority government can not be excluded, or that a government cannot be formed as happened in 2015. Also, it could be possible that any coalition government that may eventually emerge will not remain in power for the entire term and that new elections will be necessary at some point in the future, before the end of the legislature.

5. Political and policy uncertainty will be of little consequence for the 2019 economic outlook, but the type of government that emerges from the general election could matter for Spain’s medium-term outlook.

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