Clock ticking as Spanish politicians try to form govt

epa05178180 Pedro Sanchez (L), the leader of Spanish socialist party PSOE, and Albert Rivera (R), leader of the Ciudadanos party, sign an agreement to form a coalition government at the Lower House in Madrid, Spain, 24 February 2016. Following the elections on 20 December 2015, Spain is still waiting for a new government after no party obtained enough votes to rule the country. Spanish King Felipe VI assignated socialist leader, Pedro Sanchez, as candidate to form Government, now Sanchez will have to negotiate with other political groups to obtain enough support at the Lower House to be sworn in as Prime Minister next 02 March 2016. If no agreement is reached, Spain will have to hold new elections in June. Besides the pact made with Ciudadanos, PSOE would need the support of more groups to form Government.  EPA/SERGIO BARRENECHEA

Bloomberg

Ten weeks after a general election produced an unprecedented deadlock in parliament, efforts to form a government in Spain are entering a critical phase.
Socialist leader Pedro Sanchez will start the countdown to a fresh ballot when he asks lawmakers to let him lead the next government in a vote on Wednesday. The legislature will then have another two months to find a prime minister before a new election is triggered. With just 90 lawmakers in the 350-seat chamber, and another 40 from his pro-market ally Ciudadanos, he’s almost certain to be rejected at the first attempt.
Still, Sanchez is betting that his attempts to find a way out of the impasse will win him credit with voters and put pressure on Acting Prime Minister Mariano Rajoy’s People’s Party and anti-austerity group Podemos to drop their opposition. Sanchez aims to make the PP and Podemos look like obstacles to the Socialists’ efforts to take the country forward, according to Kiko Llaneras, a Madrid-based polling analyst at the research group Politikon.
“Nobody wants to go to elections but if it has to happen everyone wants to go with the best possible political message,” said Llaneras. “The polls after the confidence votes will be a key test.”
Sixty-five percent of Spaniards would blame politicians for refusing to compromise if the country goes to fresh elections, according to a Metroscopia poll based on 2,400 interviews this month. The margin of error was 2 percentage points. Metroscopia plans to conduct a fresh study next week, as does GAD3 a rival pollster.

New Realities

Spanish politicians are struggling to forge a governing majority after the country’s two-party system was swept away by the political fallout from the economic protest.
The country’s government bonds have underperformed Italy’s over the past year, even though Spain’s economy has been growing more than three times as fast. Spain’s 10-year debt yields 11 basis points more than Italy’s. In April last year it was yielding 8 basis points less.
It’s a similar story across the rest of the continent as old certainties are questioned and new challenges strain the bonds holding the European Union together. The U.K. is preparing to vote on whether to leave the 28-nation bloc while Chancellor Angela Merkel faces the biggest challenge of her career as her allies recoil at the flood of refugees into Germany. Ireland is facing its own political stalemate after an election last week.
If Spain’s leaders fail to form a government, the election re-run would likely be held on June 26, three days after the “Brexit” referendum.
Sanchez and Ciudadanos leader Albert Rivera signed an agreement last week that could form the basis of a governing coalition, should they manage to gain the support from other political forces.

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