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EUR: Spanish election confirms political gridlock - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 21, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, suggests that the polls were indicating a high probability that the ruling party would fail to achieve a majority and that is what has happened in yesterday’s election in Spain.

    Key Quotes

    “The official count showed that PP won 123 seats in the 350-seat parliament, well short of the required 176 seats for a majority and 63 seats less than it won in 2011. The Socialists won 90 seats, Podemos did better than expected, winning 69 seats while Ciudadanos did worse than expected but still managed 40 seats. The count is in a way one of the worst-case scenarios in terms of achieving a quick coalition - PP with Cuidadanos or Podemos with the Socialists are not workable as neither would reach the magic majority figure.”

    “The Socialists, Podemos and another anti-austerity party, Unidad Popular, would also fall short if combined by 15 seats. That combination along with some of the other smaller parties/independents (others won 28 seats) is still possible but would certainly be extremely unstable.”

    “PM Rajoy, as the ‘winner’ will have first attempt but there is certainly a high probability that both PP and the Socialists fail to muster a working government and with both main parties ruling out a grand coalition, fresh elections in Q1 next year is a real possibility.”

    “The euro is not responding to this election outcome and you do get the sense that investors are somewhat immune to political uncertainty but no doubt this could escalate into something that investors may pay more attention to. The surprise showing for Podemos is certainly worth watching given polls had shown their popularity was in decline. They support a referendum in Catalonia as well and a coalition deal that includes them might well raise the chance of that referendum taking place.”
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