When the Spanish general election of June 26 rendered an equally inconclusive result as the elections of last December—which had ended in a hung parliament—everything may have appeared to stay the same in Spain. But the repeat election in June was less a regular contest than a test of new expectations created by the December results, when two new parties—the anti-austerity Unidos Podemos and center-right Ciudadanos—had broken the duopoly of Spain’s conservative Popular Party (PP) and Socialists (PSOE). Those expectations have now been laid to rest, creating a different post-electoral scenario. The failure of Podemos to achieve its strategic objective of surpassing the PSOE’s vote and seat shares, thus establishing itself as the clear leader of the left, was the most dramatic result. The other was the size of the vote of the Partido Popular: almost 700,000 more than in December, despite a steady roll of news involving the party in political scandals during the weeks leading up to the vote.

These outcomes left Unidos Podemos as the principal loser of the election. The two parties that had formed the left-wing electoral alliance, Podemos and the United Left (Izquierda Unida), received just over a million fewer votes than they had received running separately in December. Joining forces nonetheless allowed the alliance to maintain the same sum of seats (71 out of a total 350) as the two parties had won in December. The principal winner was without doubt the PP, although it failed once more to obtain enough seats to govern on its own or with Ciudadanos, (the latter lost more seats than votes). The ball has thus ended up, once more, in the camp of the PSOE, whose votes in parliament are again necessary to form a new government.

What will the socialists do?

The Socialists, however, remain divided over the course the party should take to fulfil the promise made by its leader Pedro Sanchez that he could guarantee a government would be formed following this vote, and that there would be no “third” elections. The possibility of a grand coalition in which the PSOE would take part in a government led by the PP is virtually ruled out, lest Rajoy were to step aside to allow another party figure (less tainted by the PP’s corruption scandals) to be nominated in his stead; an unlikely prospect. Leading PSOE figures, however, have argued that it is time to cut to the chase and allow the PP to form a minority government. The PSOE is the only party that has the seats in the lower house to do so, either by voting to support a PP prime ministerial candidate (presumably Rajoy), or abstaining in a second round of voting.

Other Socialist party leaders argue that the party should focus instead on leading the parliamentary opposition now that it has beaten Podemos for that spot. An alternative “Left” alliance with Podemos to appoint Sanchez as prime minister would be costly, if not impossible, to arrange because it would also require the support of Catalan nationalists involved in the regional government’s drive to pursue unilateral secession. Yet another theoretical alternative, that of a government based on a coalition between PSOE, Ciudadanos, and Podemos, appears blocked by the latter two parties whose economic programs stand starkly at odds with each other.

The most likely outcome, thus, appears an orchestrated sequence in which the PSOE first acts so as to put the PP’s inability to form a government on its own terms on display, and later helps appoint a PP led minority government in return for programmatic concessions.

More critically, any explicit coalition of the PSOE with Podemos seems now to have been ruled out by the animosity felt towards the Podemos leadership by many leading socialist figures, including Sanchez, who celebrated Unidos Podemos’s failure to gain more seats as an outright electoral victory. The most likely outcome, thus, appears an orchestrated sequence in which the PSOE first acts so as to put the PP’s inability to form a government on its own terms on display, and later helps appoint a PP led minority government in return for programmatic concessions. As Spain requires a constructive vote of no confidence to bring down an appointed prime minister, the socialists could exercise considerable leverage over legislation in such a scenario without bringing down the government. This, in any event, appears to be the plan being laid out by the party’s federal committee which has voted to reject a Rajoy’s candidacy outright, although it has promised to revisit the matter if the PP is able to garner support from other parties, most likely Ciudadanos. The latter, however, has been reticent to commit its support in the absence of support from the PSOE.

The European dimension

Looming over this complicated political manoeuvring in Spain is last week’s ruling by the EU Commission that Spain and Portugal have not done enough to rein in their excessive public deficits, for the first time initiating the procedure that could lead to a fine. The first task to be faced by any new government in Spain will be to approve a budget for 2017 that will thus become the focus of much European scrutiny. The Rajoy government tolerated significant budgetary overruns by regional governments during the year and a half prior to the elections, promising to return to the path of fiscal consolidation once the elections had taken place, in a much publicized letter to Jean-Claude Juncker. In what was a particularly conspicuous political move, the Commission in return decided in May to postpone the decision until after the Spanish election, arguing that it was then not the right economic or “political” moment to do so. The fines may in the end not be levied or be minimized. Nevertheless, the decision to initiate the procedure right after the elections—with Spanish bond spreads among the hardest hit by the results of the Brexit referendum three days before the elections—is sure to carry consequences. It signals either an extraordinary absence of flexibility on the part of the Commission in the aftermath of the Brexit vote or even an attempt to up the ante on Spain’s party leaders as they negotiate to form a government.

It is remarkable how little attention was paid in the Spanish electoral campaign to the role a future government should play in the ongoing politics of the Eurozone.

The political scene in Spain has of course been deeply affected by Europe’s rigid response to the hardship in the Eurozone’s southern states. Not only did Podemos grow out of an anti-austerity movement. The limited jobs recovery that Spain has seen in recent months (one of the conservative government’s main selling points) was achieved only in the context of the ECB’s turn to quantitative easing and of the fiscal easing that the Rajoy government tolerated in the run-up to the elections. The labor market reforms introduced by the PP in 2012 have meanwhile contributed to a fall in collective bargaining coverage, a sharp deterioration in employment conditions, as well as a significant increase in the proportion of the population at risk of poverty, including those “in-work”. A renewed intensification of fiscal austerity to meet European demands could easily undo the country’s precarious recovery. Time and again, the response of the Commission to such observations has been that labor market reforms have not gone far enough and that Spain needs to implement a further round of flexibilization—a view also espoused by Ciudadanos (though it is framed in terms of an “equalisation” of employment conditions for temporary and indefinite workers).

Given the importance of these issues, it is remarkable how little attention was paid in the Spanish electoral campaign to the role a future government should play in the ongoing politics of the Eurozone. All parties formally took the position that they would seek greater flexibility from Europe on the fiscal front in the coming months. Yet, when it came to debate, the issue was almost invariably reduced to whether or not Podemos’ anti-austerity platform would take Spain down the disastrous path of the Syriza government in Greece. Hyperbole left no room for serious consideration of the question. As one PSOE politician put it to his Podemos counterpart during one of the last pre-electoral debates, in matters such as these, it was best for Spain “not to punch above its weight.” That outlook does not paint a hopeful picture for other Eurozone governments hoping to balance the entrenched German view that has ruled Europe’s response. Indeed, it appears a caricature of the “Merkelism” at work in the Eurozone that Wolfgang Streeck and Maurizio Ferrera have recently written about. If the PSOE finally does establish itself as the key veto player over the policies of a new minority government led by the PP, one can only hope that it will use that position to rebalance social policy at home and to play a more constructive role in Europe.

Photo Credits CC: Jose Maria Cuellar 



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