Last Sunday’s electoral results in Spain have cast a gloomy outlook on prospects for securing a stable government. Markets were deeply disappointed as their bet for a centre-right coalition melted down. Ciudadanos performed worse than expected while Partido Popular scored a win but failed to secure enough support.
Fernando G. Urbaneja | One of the values of Spain’s democracy over the last forty years has been left behind following the general elections: namely, political stability. Now the Spanish political scenario resembles more that of Belgium than Germany. The results obtained on December 20th have disappointed all parties’ expectations for putting together a parliamentary model, leaving all the hipotheses on how to form a stable government in the dark.
Many people feared that the outcome of the December 20 elections in Spain would be difficult to manage. But the final situation is much worse than expected. As soon as the recount began after the voting, the conservatives of Prime Minister Mariano Rajoy’s Popular Party (PP) lost their hopes of forming a majority government with Citizens (Ciudadanos). Spain is now, undeniably, facing a period of difficult coalition-building after yesterday’s elections. And this is a very worrisome situation for the country as uncertainty is likely to increase, affecting the mood of investors and companies.
Last night, the leaders of the Ciudadanos and Podemos emerging parties joined forces to deliver a scathing bashing to the Socialist candidate during the debate held as a foretaste of the Spanish General Elections on December 20th. Spanish Prime Minister Rajoy judiciously declined the invitation to assist at the expected slaughtering.
The major economies are now characterised by desynchronised economic cycles, with divergent policy regimes. This complicates the equity investment decision. Europe may be a relative winner, but too much of the globe is seeing financial conditions tighten, against lacklustre growth, to be optimistic on directional trends. We see downside risk through the opening months of 2016. The European economy is moving in the right direction and further ECB action promises…
Fernando Barciela | Passos Coelho won the elections in Portugal with 38.6% of the vote, but lost his majority in parliament. Even though he has been tasked with forming a new government, Portuguese left parties have adopted a pragmatic approach which makes an agreement between the Socialist Party, Communist Party and Bloco de Esquerda increasingly likely. For the time being, they have already appointed Eduardo Ferro Rodrigues, a socialist, as the President of the parliament.
BARCLAYS | The results of the general election in Portugal came in broadly in line with recent polls: the PSD/CDS conservative coalition, currently in government, won again with 38,5% of the vote, but it fell short of an absolute majority of seats in parliament. Political instability could potentially also result in early elections after one year.
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 European stock exchanges.
UBS | Pro-independence parties in Catalonia have won a majority of seats – but not of the total of votes cast. As a result, we would advise investors to remain cautious about buying Spanish sovereign debt until some clarity emerges over the next steps of the new regional government.
Parties staunchly supporting independence have won the elections to the regional Parliament only in terms of seats, not votes.