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Year of elections will not shift Spain's economic woes

Thursday, January 22, 2015

Subject

Economic backdrop to the election cycle.

Significance

Incumbent administrations will be helped in this year's local, regional and national elections by a number of factors that will contribute to economic growth: lower energy prices, low interest rates, easier bank lending, income tax reforms, a stabilisation in house prices and the stimulus to exports of a weak euro. Nevertheless, widespread disillusion with the political system is likely to result in significant changes in the political landscape, with repercussions for the direction of policy both within Spain and at the European level.

Impacts

  • A coalition of the left would push for an easing of austerity measures and more public spending paid for by more progressive taxation.
  • It is also likely to be supportive of a move towards a federal state.
  • Domestic demand should rise, unemployment continue to fall and property prices to stabilise and start to move upwards in some locations.
  • Challenging political and economic conditions will make it difficult to sustain fragile coalitions.
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