Spain’s Socialists seek to govern alone after poll win

A leader of Spain’s governing Socialist party has said it will attempt to govern without coalition partners after winning Sunday’s general election and repelling a fragmented challenge from the conservative opposition.

The PSOE will hold 123 seats in the 350-seat parliament, 37 more than in the last general election in 2016. The result gives prime minister Pedro Sánchez options to assemble a parliamentary majority, most probably with support from the leftwing Podemos party and moderate regional parties.

However speaking to Spanish radio on Monday, deputy prime minister Carmen Calvo said the party’s priority would be to “try to form a government alone”.

“We’ve tried this formula already with very good results,” Ms Calvo told Cadena SER. The Socialists have presided over a minority government since ousting Mariano Rajoy’s People’s party in a confidence vote last year.

Mr Sánchez hailed his party’s decisive victory over a weakened rightwing opposition, which split into three with the breakthrough of the ultranationalist Vox.

Vox will take 24 seats, its first national representation. The PP haemorrhaged support while the economically liberal Ciudadanos party, which had campaigned by ruling out a deal with the Socialists, made gains.

The prime minister told supporters in Madrid on Sunday night: “The Socialist party has won the general elections, and with them the future has won and the past has lost.”

Together with the far-left Podemos, whose support held up better than expected, Mr Sánchez has 166 seats in the 350-seat Congress. He could try to form a government with the support of Basque nationalist and moderate regional parties.

Spain’s stock market underperformed its European peers after the result of the poll, with utilities stocks under the most pressure.

Madrid’s Ibex 35 slipped 0.3 per cent on Monday, compared with a rise of 0.2 per cent for the Europe-wide Stoxx 600.

The country’s government debt rallied. Demand for its benchmark 10-year paper sent its yield to an eight-session low, down 1.9 basis points to 1.009 per cent.

On Sunday Pablo Iglesias, leader of Podemos, reiterated his desire to form part of a socialist-led government. “We would have liked a better result, but the results are sufficient to achieve our two objectives: to stop the right and the extreme right and to form a coalition of the left,” he said.

Mr Sánchez called Sunday’s elections after Catalan separatist parties withdrew their support over his refusal to negotiate an agreed referendum on independence for the region. Forming a new government that depended on them would be complicated.

The presence of Podemos inside the government would also make reaching one-off agreements with the economically liberal Ciudadanos party difficult.

Ciudadanos took 57 seats in the elections, up from 32 in 2016. Ciudadanos leader Albert Rivera supported Mr Sánchez’s failed 2016 bid for the premiership, but in recent months has hardened his opposition to Mr Sánchez over his alliance with Catalan separatists and pushed his party to the right.

On Monday Ciudadanos showed no desire to rethink its refusal so far to entertain a coalition with Mr Sánchez.

“Sánchez has taken the decision to govern with Podemos, and we [have decided] to go to the opposition if we could not get Sánchez out of the premiership,” Ciudadanos general secretary José Manuel Villegas said on Monday. “But of course we will sit down and talk. Spain deserves dialogue, and we will make a responsible and vigilant opposition.”

The PP, which has alternated in power with the PSOE throughout Spain’s democratic era, had its worst ever election result and will fall from 137 seats to just 66.

“The leaders of the opposition will be the MPs of Ciudadanos,” Mr Rivera said on Sunday night.

Spain now has five major parties split into increasingly antagonistic left and right blocs but it has no tradition of cross-party coalition building at national level. It is the only country among the largest EU states to have not had a coalition government in the past 40 years.

Roberto Scholtes Ruiz, UBS’s chief investment officer for Spain at UBS, said: “A left-leaning coalition could drag down banks and utilities on new taxes and tougher regulations, while backtracking in some key structural reforms could push up slightly Spain’s sovereign risk premium.”

Shares in ENCE Energy were down 4.8 per cent. Iberdrola fell 1.4 per cent and also faced a cut to its rating from Bank of America, from “buy” to “neutral”.

Financial stocks helped offset the overall decline. Bankia made the biggest single advance on the Ibex 35, up almost 3 per cent. CaixaBank rose more than 1 per cent.

Additional reporting by Michael Hunter in London





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