Spain Elections Preview: Uncertainty looms large as the 4 parties battle it out

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 18, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Spain is all set to conduct national election this Sunday, 20th December. Predictions on who will succeed Mariono Rajoy have dominated discussions of political pundits in the run up to the election. Spain will cast its vote to decide whether Rajoy’s party will return to power for the next term. The question that has surfaced is if not Rajoy’s centre-right People’s Party, which of the different possible combinations will likely rule at the centre. For decades now centre-right People’s Party and Spanish Socialist Workers Party alternating in government had alternatively assumed power. Experts believe that all this will change with the upcoming elections.

    Rajoy, post his election as the Prime Minister in 2011 at the height of the European financial crisis, decided to execute austerity policies. His policies however met with severe opposition and eventually the popularity of his party declined. At this point the Socialists should have had ideally taken advantage of the situation to turn majority in its favour. Unfortunately, the party failed to do so. This is where Spain saw the rise of Podemos (“We can”). a grassroots radical left movement was started to oppose austerity measures and official corruption. This movement turned into a party Podemos in early 2014. Soon, it posed a challenge to the People’s Party for first place in the opinion polls.

    Another new political force has also appeared. Ciudadanos (Citizens) started out as an anti-independence party in Catalonia. It currently has broadened its base to become a nationwide liberal-centrist and anti-establishment party.

    The People’s Party in the latest polls attained over a quarter of the vote, lower than 44.6% in 2011. There was a three-way tie for second position between the Socialists, Podemos and Citizens, all close to 20%.

    Given that elections are not completely proportional, a party can win majority with well under 50% of the vote. This time around no party has been able to stay above 30% in the polls. It is therefore quite certain that no-one will have a majority at the election. Thus deals will have to be made for a party to achieve confidence.

    Podemos has generally supported the Socialists at the regional level. Citizens on the other hand supported the centre-right governments to be in power. If the elections show that neither of the mentioned combination has been able to put together a majority, then Podemos, Citizens and the PSOE would likely co-operate to form a broad centre-left coalition. However, a possibility that either of the sides may succeed to attain support from the regionalists remains.

    Electoral survey in Spain conducted by the Centro de Investigaciones Sociológicas (CIS) shows the possibility of Podemos and its allies obtaining around 16 per cent of the vote and between 45-49 seats in Parliament.

    If these predictions hold true, Podemos would remain behind Ciudadanos (63-66 seats), the Socialist Party (77-89 seats), and the PP (120-128 seats). Thus 16 per cent of the vote will not be enough for the party to fulfil its goal of becoming the most popular party in Spain. The combined number of seats of Podemos and the Socialist Party (138) would also not meet the requirement for an absolute majority (176 seats).

    On the other hand a heterogeneous coalition between Podemos, the Socialist Party and Ciudadanos seems more unlikely than one between the PP and Ciudadanos. The PP and Ciudadanos are relatively close to each other in most ideological respects.

    The uncertainty that shrouds the Spanish elections this time was never seen before. Political experts will thus have their eyes on the election results scheduled to be out on Monday.
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