Spanish Vote Points to Fraught Coalition Talks

Spanish Vote Points to  Fraught Coalition TalksSpanish Vote Points to  Fraught Coalition Talks

Spain's major parties, taking stock after the most fragmented national election result in the country's history, embarked on Monday on potentially long and arduous talks to form a coalition government.

With neither Prime Minister Mariano Rajoy's conservatives nor leftwing parties winning a clear mandate to govern, the country faces weeks of uncertainty that has cast doubt on the durability of its flagship economic reforms and unnerved financial markets, Reuters reported.

Despite garnering the most votes, the center-right People's Party had its worst result ever in a parliamentary election, as Spaniards angered by high-level corruption cases and soaring unemployment turned away from the party in droves.

The outcome was reminiscent of a similar situation in neighboring Portugal, where the incumbent conservatives won an October election but a socialist government backed by far-left parties was sworn in.

The inconclusive vote heralded a new era of pact-making, shattering a two-party system that has dominated Spain since the 1970s, with an unexpected surge from upstart anti-austerity party Podemos—the latest of several strong showings by populist parties in European elections—giving it a potential role as kingmaker.

"We're starting a period that will not be easy," Rajoy told cheering PP supporters at party headquarters in central Madrid. "It will be necessary to reach pacts and agreements and I will try to do this."

However, the likelihood of a PP-led coalition faded with Podemos' third place, outpacing fellow newcomer Ciudadanos whose market-friendly policies had been seen as a natural fit for the PP.

A tieup between the PP and Ciudadanos would yield 163 seats, far short of the 176 needed for a majority administration.

Ciudadanos leader Albert Rivera on Monday urged the main opposition Socialists, which finished second in the ballot, to support a minority PP government on a law-by-way basis.

"Spain can't allow itself to become Greece. Spain can't become a chaotic country," he told broadcaster Telecinco.

But the Socialists reiterated they would not back Rajoy, although they did not fully rule out supporting another PP candidate, in what would be a de facto grand coalition.

"The Socialist party is going to play a very responsible role in this process," senior party member Cesar Luena told Cadena Ser radio.

A Shift to the Left

Overall, Podemos' strong showing tipped the balance to the left of the political spectrum with five leftwing parties led by the Socialists and Podemos together winning 172 seats.

Such a leftwing alliance will be hard to form, however, as groups differ on economic policy and the degree of autonomy that should be awarded to the wealthy northeastern region Catalonia, home to an entrenched independence movement.

"This result confirms Spain has entered an era of political fragmentation," said Teneo Intelligence analyst Antonio Barroso. "The key question is whether there will be a coalition of parties against Rajoy."

That uncertainty spilled over into financial markets, with Spanish shares lagging their European counterparts and benchmark bond yields rising.

The Spanish Constitution does not set a specific deadline to form a government after the election. Analysts say negotiations could go for weeks and maybe trigger another election.

"What most worries me is what the new government will look like and how it will govern," said PP supporter, 29-year-old teacher Carlos Fernandez, outside party headquarters.

"A grand coalition between the PP and the opposition Socialists seems the best option, but I doubt that will happen."

Socialist leader Pedro Sanchez said on Sunday Rajoy had the right to have a first go at forming a government.

"Spain wants the left, Spain wants change, but the PP has won the most votes," he said.

A minority PP government would be technically possible, as would a grand coalition, but both the PP and the Socialists ruled that out during campaigning.