Catalonia’s Results, Upcoming General Elections Could Lead Spain’s Growth To 2%


Spanish politics will be under the spotlight this week in Europe. The most likely consequence is that Spain’s risk premium will increase and the Ibex will underperform relative to other stock exchanges.

Spanish politics will be under the spotlight this week in Europe. An increase in the country’s risk premium is expected (approximately 134 basis points against Italy’s 114 on Monday), combined with a relative underperformance of the Ibex compared with other main European stock exchanges. And this will be the result of the confusing outcome of Catalonia’ elections (an overall majority in seats for the separatists parties, but not in votes).

According to Bankinter analysts, implications of politics on the economy are not “negligible”: the risk premium and the Ibex would be affected first, GDP growth afterwards.

“We think economic growth could have expanded by approximately 4% in Q215, then slowed gradually from Q3 to 3%. Depending on the final outcome in Catalonia and the upcoming general elections in December, GDP growth could decrease to even 2%,” the experts say.

Barclays analysts also expect some concessions from the central government to the region of Catalonia after the 20 December general elections: in all likelihood, they will start negotiations to restructure the balance of power in Spain’s regions, probably involving constitutional reform. Some concessions towards Catalonia are on the cards: a reform of the redistribution of fiscal balances and further devolution of powers, with possibly even greater fiscal responsibilities.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.