02 March 2016

Spanish political deadlock hits turning point with PSOE trying to win confidence vote

The Political impasse in Spain might be drawing to a close this week, with the Socialist leader becoming Premier after the investiture debate ... or face a re-run of the election on 20 December, 2015.

By Paula Martín Camargo, Editor

PSOE's Pedro Sánchez – already called Pedro ‘The brief’ by his political opponents – sealed an agreement with Ciudadanos’ (C's) leader, Albert Rivera, to vote for Sánchez this week and end the political tie with a new Government.  But their 130 seats fall short of the 176 needed for an absolute majority in the first vote in Parliament on Wednesday. The Socialist leader is seeking anti-austerity group Podemos’ support to win a confidence vote, but incumbent Rajoy and Podemos’ leader, Pablo Iglesias, have vowed to vote against him and therefore a second vote looks likely on Friday. In that event Sánchez would only need a simple majority but this is not foreseen. If he fails to win a majority, and the Socialist leader fails to form a Government within two months, fresh elections will be triggered in June – the date might be the 26th, just 3 days after the UK's EU referendum.

1.      Background 

The outcome of the 20 December election was a political puzzle that might well produce a change in the Government towards the left and ‘new’ parties, or present a brain teaser for most negotiators and analysts. As of today, it has proved to be the second option:  PP’s Acting PM, Mariano Rajoy, officially won the election (123 seats), but not even centre-right Ciudadanos (40 seats) would start talks with him, given the numerous corruption allegations against PP lawmakers that have emerged lately, and C’s bid to “clean Spain’s act”. King Felipe VI formally invited Rajoy to try and form a Government but the PP leader declined the mandate, saying he would not “go to the Congress to fail a confidence vote”. The monarch then turned to Sánchez, whose declared intentions were to reach an agreement with Podemos (69 seats) and C’s and seek other forces’ support. But Iglesias’ party red lines, as well as his refusal to continue negotiations if Sánchez didn’t kick Rivera away from the table, infuriated many of the Socialists’ leading figures, who claimed Iglesias’ attitude was arrogant and not aimed at reaching a deal but at breaking the talks. Sánchez then sought Rivera’s support and finally struck a deal last week, after which Podemos said negotiations had failed.

2.      PSOE-C's agreement

After intense negotiations, Rivera and Sánchez sealed a political programme which they described as “reformist and progressive”, praising it as a ‘new transition’ for Spanish democracy, and being against an independence referendum in Catalonia. The 200 measures signed by PSOE and C’s include economic and social reforms, constitutional change and a call on the European Commission to allow Spain more time to meet the deficit targets set by Brussels – the new Government would plan to reduce the public deficit to 3% by 2017. The text inked by the two forces promised to roll back the latest labour market reform made by Rajoy in 2012, in order to reduce the deep gap between workers with fixed contract and temporary staff. It would also seek to reduce taxes and red tape for freelances and SMEs.

The programme established some measures to fight against political corruption, one of Ciudadanos’ political programme’s core measures. It also included a new wealth tax– but not on the working or middle classes - and the revision of inheritance taxes. The document was not well received by Moody’s, which deemed PSOE-C’s pact negative for Spanish economy, arguing it is “vague” in its proposed economic and budgetary measures, and regretting that the new Government would ask for a slower return of the sovereign debt in spite of a faster growth of the country’s economy.

Uncertainty over the new government and the proposed hike on taxes – a core measure in PSOE and Podemos programmes in the run-up for the election - has been seen as the main reason behind the biggest capital flight since 2012: the central bank reported that last year wealthy individuals worried over increasing uncertainty withdrew €70.2 billion from the country.

3.      Why Podemos broke up talks on an agreement

Sánchez said the text was carefully worded so as to win cross-party support, or at least make it possible for other parties to abstain. However, Iglesias rejected the pact and withdrew from the negotiating table, saying: “The Socialists’ choice is incompatible with us.”

Iglesias had reportedly ruled out doing business with Ciudadanos and warned Sánchez that it was either them or Rivera’s party – who also declined to accept Podemos in the table. The Parties are at odds mainly on economic matters – C’s is more business-friendly while Podemos doesn’t trust the markets, big companies - or Catalonia – Iglesias asked for an immediate referendum while Rivera prefers Constitutional change. Podemos’ Iglesias has called Rivera ‘the new PP’ repeatedly during the campaign, and hostility between both parties got to a point where Ciudadanos has been called ‘the clockwork orange’ – alluding to Rivera’s party colour.

4.      Rajoy hasn't won backing from any other political party

Almost every single party in the Parliament ruled out backing PP, alleging the centre-right party, and acting PM Rajoy himself, are embroiled in corruption cases. Other reasons such as the mismanagement of the Spanish crisis, a need for a new way of doing politics in Spain – argued by C’s and Podemos – or how Rajoy’s Government has used his absolute majority in Parliament to rule without agreements with other political parties and social agents such as labour unions – as claimed by leftists and nationalists - have turned against PP when seeking support for re-election.

5.      Catalonia's key role in the negotiations

The question of Catalonia and its surging secessionist bid, that now has the regional government’s backing and has already put forward motions to start independent institutions, has shaped itself as a deal-breaker during the talks after the inconclusive election. While PP and PSOE don’t want Catalonia to separate from Spain, they differ on the role of the Spanish Government in handling the issue.

Podemos’ 69 seats in Parliament partly belong to different regional groups such as En Comú Podem, the Catalan branch, and is thus committed with the nationalist cause. Iglesias said a binding referendum on secession from Spain was a red line in the negotiations. C’s originated from a Catalan movement against nationalism, and has proposed to reform the Constitution to allow the Spanish population to have their say in the matter.

Catalonia President Carles Puigdemont recently published a letter on The Guardian in which he said the region “is a key player in achieving a stable government in Madrid” and called for the Spanish parties to “summon up the political courage” to agree on a Catalan referendum.

6. Conclusions

The clashes between PSOE and Podemos’ leaders, and the bad blood between Sánchez and Rajoy during the investiture debate at Parliament, loom large over an agreement between any of these forces to form a Government in the short term. Thirty years of governments by a single ruling party and a rare need for compromise has made Spanish politicians unaccustomed to pacts and agreements, so party leaders are finding it hard to give up some of their claims or convince their members they are not being ‘defeated.’

Spanish people will most probably have to vote again in June and polls will be key, with commentators suggesting C’s and PSOE will likely lose votes to PP and Podemos respectively. Some hint at the possibility of Sánchez presenting himself as the proactive statesman who will push the country out of the impasse, with his mind already on a probable re-run of the election in 26 June.