International investors are not even concerned about the possibility of Podemos and its options in Madrid (Ahora Madrid) and Barcelona (Barcelona en Comú) eventually winning in Spain’s two most important cities. According to strategists, the key issues are who can govern the whole country and that either of the two main parties can negotiate with Ciudadanos.
The market considers Greece a good example… to avoid. The Tsipras Government has been unable to stop capital outflows and, for the moment, to reach an agreement for a bailout extension. The Greek risk premium rose over 1,000 basis points on Monday and Athens admitted that they need an urgent agreement in order to honour their commitments. The possibility of default is returning with a vengeance.
In light of the situation in Greece, Spain’s Podemos stopped mentioning their “friends” from Syriza a while ago. Pablo Iglesias has already met some investment bankers and softened many of the party’s economic prescriptions, including that regarding universal basic income.
What might happen in the autonomous elections on Sunday is by no means a trivial matter: regions control one-third of public expenditure in Spain and are vital to the establishment and development of national policy. Besides, the market believes that many regions are in fact supported by the State, which grants them very cheap financing to survive.