Spanish Elections: Europe’s other vote – RBC CM

Research Team at RBC Capital Markets, suggests that with the outside world focussed primarily on the impending UK referendum it’s easy to forget that an important vote in its own right takes place in Spain this weekend.

Key Quotes

“On Sunday, Spanish voters return to the polls for the second time in six months to attempt to select a new government. To quickly recap December’s poll produced a historic outcome displacing the two-party system that had dominated Spanish politics since the post-Franco transition to democracy in the late-1970’s but left a fractured political landscape in its wake. With no obvious two-party coalition feasible, the parties spent four months negotiating on the formation of a new government without success prompting these fresh elections.

On the face of it, little has changed in the interim in terms of voting intentions. But one small alteration could have significant ramifications post-election –Podemos, who won 69 seats last time out, is now running on a joint ticket with the previously separate United Left party who won just under 4% of the vote last time with polls suggesting that the newly combined entity may displace the Socialist PSOE as the second biggest party in parliament.

So a further bout of political uncertainty looks likely following the poll but one feature of the past 6-9 months though is how resilient the Spanish recovery has proved during this period of political uncertainly. That said the lack of a permanent, stable, administration is likely to begin to weigh on activity at some point. In addition, the process of fiscal and structural adjustment is still incomplete with the additional risk that past structural reforms might be reversed.”