Spain’s Socialists will struggle to revive stability

Subject

Spain outlook.

Significance

Following its general election victory for the first time since 2008, Spain’s Socialist Party (PSOE) must negotiate with centre-right opposition or regional Basque or Catalan parties to form a government. An agreement with the centre-right Ciudadanos would likely provide more domestic stability and would be the preferred option in Brussels and for investors, but Ciudadanos has ruled this out, while the PSOE leadership is under internal pressure to avoid negotiations with right-wing parties.

Impacts

• Vox will target working-class PSOE voters who may become disillusioned if Prime Minister Pedro Sanchez fails to instigate economic reforms.
• Ciudadanos would rather stay in opposition and aim to become Spain’s largest right-wing party, overtaking the People’s Party.
• Domestic instability will reduce Spain's capacity to enhance its post-Brexit policy influence in Brussels.