29/06/2023 As the hot and heavy summer descends, the world is looking forward
to the first holidays in three years without any Covid travel restrictions. China has fully
reopened, the US no longer requires a vaccine for travellers, and the fortress that was New
Zealand has let down its drawbridge. With thoughts turning to the beach, spare a thought for
the Spanish. Rather than face irritation from inebriated Brits drinking up the Costa Del
Sol, they now face a trip to a sweaty polling booth on Sunday 23rd July thanks to
a snap election.
Called
Prime Minister
Pedro Sanchez on 29th May, the election sees all 350 seats in Congress and 208 of
266 seats in the Senate up for grabs. The magic number for a majority is therefore 176
seats. Sanchez’s Socialist party, the PSOE, are currently
polling
at around
27%, or 102 seats. This is down from the 120 they won at the last election in November 2019.
The main opposition conservative party, the PP, are topping polls at around 34% which could
translate into 140 seats, a massive increase from the 89 they took last time round, but
still short of a majority. 
To add to the Prime Minister’s woes, his party
performed terribly in the recent regional elections, losing nearly all of the country’s
largest cities to their conservative rivals, with a particularly painful loss of Socialist
stronghold Seville. His coalition partners, the left wing anti-austerity Unidas Podemos,
disappeared
off the
electoral map altogether in several regions, including Madrid.
The gamble
So why is Sanchez gambling with an election now?
Even his own government didn’t expect it, with one official
saying
“The move
has caught us by surprise, but now we know about it, it is the bold gesture we need to win”.
Sanchez made the announcement by
saying
he needed to
“seek a clarification about the wishes of Spain’s people, a clarification about the
political direction that the government should take”. It is the “political direction” that
is key to this sentence. Does it want to go left or right? Spain is no longer a country
dominated by two traditional parties. The EU sovereign debt crisis after the 2008 financial
crisis tore apart the electorate, much as it did in many other countries. If we take the
poll of polls from
Politico
further back
in time, you can see how new parties have emerged in the last ten years – but also how
volatile their support has been: 
Winning an outright majority for the two largest
parties has become almost impossible with such a fractured electorate. Sanchez only came to
power in 2019 after creating a coalition government for the
first time
in eighty
years. Even that took two inconclusive election results and an
abstention
for the
investiture vote for his government by the pro-independence Catalan separatist party. The
PSOE plus Podemos coalition only had 155 seats, short of the number needed for a majority.
Just a few months after taking up power, the pandemic hit. Sanchez was always going to be up
against it. But Sanchez has gambled before and won. He came to power in June 2018 by winning
the first no-confidence vote in Spanish history,
removing
the
longstanding PP Prime Minister Mariano Rajoy after he had become tainted by a corruption
scandal. This was all the more astonishing as Sanchez became leader of a minority government
with only 84 seats in parliament – and then remained as PM through two more inconclusive
elections where his party failed to gain a majority of seats. So he knows a thing or two
about how to play the political game and win.
The advantage
This time round he is betting on the speed of
the election and the fragmentation of the electorate working to his advantage. Split ticket
voting is penalised in Spain’s electoral system so if he can unite the left wing and
splinter the right, he still stands a chance of success, not least because the PP are
unlikely to be able to govern alone. The regional election results saw success for the
right-wing anti-immigration Vox party, who are too extreme even for some natural
conservative voters. The PP has had to have discussions with Vox to rule the regions and now
Sanchez can argue that failing to vote for his side would risk letting in a party with
policies anathema to many voters. But Sanchez has his own issues on the left. His
charismatic labour minister, Yolanda Diaz, has created her own progressive faction, now
registered for the upcoming election under the name Movimiento Sumar, or “Unite”. But this
group was competing for policy space with Podemos. Splitting the vote could be costly, as
the poor regional election results demonstrated. Under Spanish law, an election
must be held
just 54
days after the dissolution of parliament. Sanchez bet that this short time period would
force the minds of the squabbling leftist politicians. Sure enough, Podemos joined Sumar
with
just four hours to go
until the deadline for parties to register for the election. Spanish newspaper El Pais
calculated
that a
joint ticket could yield 41 seats against 26 and 3 respectively if Sumar and Podemos had run
separately.
Will the gamble pay off?
Sanchez’s plan is working so far.
The gap with his rivals has narrowed. A likely Vox and PP coalition
would be
one seat
short of a majority whereas polls from mid June
had predicted
an
outright majority. Momentum means everything in an election campaign. The summer timing of
the election might also work in Sanchez’s favour. With Spaniards on the beach, only the
hardcore voters might turn out. This would inspire those who are seeking to ensure parties
they dislike, such as Vox, don’t sneak into power because of lack of votes for other
parties. This is a double edged sword however. Both the extreme left and the extreme right
have their haters. Sanchez will be hoping that more people hate the far right than the far
left. This has not quite proven to be the case across the rest of Europe. Neo-fascists have
taken power in Italy. The far-right AfD in Germany has just taken its
first
leadership of a
regional authority and is now polling in second place nationally,
overtaking
Chancellor
Scholz’s SPD party. Fear of Vox in Spain might just lead voters to the centre-right PP,
rather than encouraging voters to the left.
Impact on Spain
Whatever the outcome, it will most probably
be yet another unstable government. The leadership of the PP is untested at national level,
as are Vox, and even if they have the numbers they are unlikely to have the strength to see
out their term. It will be difficult to make policy. With Spain under the same economic
constraints as the rest of the Western World with higher interest rates, higher inflation
and fears over migration, any government will struggle. The risk premium on Spanish assets
should therefore increase, widening the spread between Spanish and German bonds and adding
yet more negative sentiment towards the Euro. 
Helen Thomas
CEO of BlondeMoney
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