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Spain election: Traditional two-party system seen coming to an end

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

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - With Spain’s election results out, the traditional party system that has been followed in the country for decades now will come to an end. The ruling Popular Party has won the most votes but has however fallen short of a parliamentary majority. The risk of being removed from power thus looms large on the PP. The lower number of votes against Prime Minister Mariano Rajoy led PP highlights the general public’s disapproval of austerity measures.

    The earlier elections saw no such situation. The two new movements which began in protest of the Popular Party’s policies won nearly a third of the seats in the country's election. The Popular Party won 123 seats in the 350-member lower house of Parliament; while the Socialist Party received 90 seats. Podemos and allies came at the third position winning 69 and Ciudadanos got 40.

    Podemos and Ciudadanos, had before the elections caused a stir among voters by repeatedly pointing out that the PP and the Socialist party cared more for their power and less for the need of the nation and its citizens.

    The new far-left Podemos and business-friendly Ciudadanos parties have received strong support from voters who have had to suffer under the austerity policies of the former government. There was unemployment and official corruption cases weighing on development and people had had enough of it. "Spain is not going to be the same anymore and we are very happy," said Podemos leader Pablo Iglesias. Albert Rivera, leader of Ciudadanos on the other hand feels the election has started a new era for young Spaniards like him.

    What went wrong during PP’s reign?

    In the last four years, ever since Rajoy led PP came to power, tensions revolving around economy, corruption scandals and separatist upheavel in Catalonia have time and again reared their ugly head. Rajoy was confident he had done his best resolve these issues. He however admitted that his party did take "difficult and even unpopular decisions" to check Spain’s economic crisis from spiralling. To a certain extent the Popular Party was successful. However the economic indicators did not speak of much success.

    The jobless rate came down only slowly and salaries for people were are 30 per cent lower than they were in 2008. This gave rise to parties such as the Ciudadanos and the Podemos, who claimed that the Socialists had brought the crisis upon Spain and the Popular Party had failed to fix the problem.

    The PP was also blamed for single handedly destroying the country's social welfare system. Cuts to national health care and public education were introduced. The party also did not stick to its promise to not raise tax.

    The separatist drive in Catalonia threatened Spanish unity and Rajoy had pledged to uproot it. Other parties are inclined towards negotiations to delegate more power to Catalonia. Podemos is in favour of leeting Catalan separatists hold a secession referendum.

    What now?

    A "grand coalition" between the PP and the Socialist party was never seen before and is pretty unthinkable even today. Also, it is evident from the election results that it will now be extremely difficult for the PP to come to power by forming a coalition. It probably will not even manage to get voted into parliament as a minority government as its alliance with Ciudadanos, which is closest to the party in terms of ideology, will not be able to add up to the number of seats required. If the PP wants to form a successful coalition it will have to gather support from parties that won 17 seats in the north eastern Catalonia region, from parties seeking independence from Spain and want more regional financial power.

    Declaring that his “party is still the No. 1 force in Spain," Prime Minister Mariano Rajoy told supporters that he will be trying to form a government but however gave no details on the plan to achieve his goal.

    Socialist leader Pedro Sanchez on the other hand said he and his party are ready for talks to reach consensus. There is a possibility that the Socialists, Podemos and Ciudadanos may unite in a three-way "coalition of losers". It is also possible that Socialists might enter into a deal with Podemos and a number of smaller regional parties that won just a few seats each.

    Federico Santi, a London-based analyst with the Eurasia Group political risk consultancy opined "Reaching a deal between the Socialists, Ciudadanos and Podemos is not going to be straightforward. ... But if the alternative is leaving the country without a government, the pressure will be on the parties."

    Political pundits expect discussions and negotiations will now be happen to decide on who will govern Spain.
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