EZA 836 Briefing Note: Spain

12 March 2008

Spain elections

Socialist victory good for Europe – on balance negative for structural reforms

The slight gain of the incumbent socialist government of José Luis Rodriguez Zapatero in the 09Mar general election takes it close to an overall majority, reducing its dependence on regional party support.
The key economic challenges for the government will be to offset the collapse of the housing boom the loss in competitiveness, visible in the burgeoning trade deficit.
Striking a balance between macro-economic demand policies and business related structural reforms will be a major challenge.
The deterioration of the so far healthy budget position remains a key risk, while experience with past PSOE governments regarding reforms is dispiriting.

Asset conclusions: PSOE win slightly negative for structural reforms. Expect underperformance of Spanish equities focused on the home market relative to the rest of the euro area.

© EZA