Jakob Suwalski (Scope Ratings) | Prime Minister Pedro Sánchez’s decision to call early elections is potentially advantageous for Spain’s economic outlook insofar as it should prevent the government from losing six months of valuable time to determine long-term policy goals, even if it means forming a coalition or minority government. This timeframe allows for reforms to be implemented and the country’s fiscal and economic challenges to be addressed.
However, the risks associated with increased political instability must also be considered. The possible need for a larger party to work with a smaller party to create a coalition government with likely conflicting long-term policy objectives could complicate decision-making, particularly on environmental issues.
Observers expecting a grand coalition between the two major parties may be disappointed. Although common in countries such as Germany, grand coalitions in Spain’s fragmented and polarised politics are particularly difficult to form. That said, we recognise that Sánchez has called early elections before and has proven himself adept at forming coalitions with unlikely partners.