The European election to be held on 26th May will be deeply influenced by the result of the recent general election held in Spain, last 28th April, in which incumbent Partido Socialista (PSOE) obtained a comfortable victory.  Pedro Sánchez’s party has been in power for just 8 months, following a successful no confidence vote against Mariano Rajoy after the court ruled against his party, Partido Popular (PP), in a corruption case.

The victory guarantees Sanchez’s investiture as Spain’s PM and offers a real possibility of achieving a period of political stability for the next few years, even though he will need the support of other political parties.

So far, it remains unclear whether there will be a coalition government between Partido Socialista and extreme left-wing party Podemos or else Sanchez will seek to hold power through parliamentary agreements. The most likely option is a single-party government, which would open the door to different parliamentary majorities, either with the left-wing or centre-liberal blocs.

Prime Minister Sánchez would have to rule through so-called “variable geometry”, reaching ad hoc agreements with different political parties according to the legislative agenda. This is clearly not an ideal situation, but is nevertheless feasible because, even joining forces, the three right-wing parties would not be able to obtain an absolute majority in Parliament.

Internal Consequences

The election has produced at least four notable outcomes at a national level:

  • The definitive consolidation of Pedro Sánchez as leader of PSOE. He has become the undisputed presidential candidate, with a clear majority in Parliament, albeit insufficient to rule alone.
  • The collapse of Partido Popular, which has registered the worst result in its history after losing half of its seats. Conversely, liberal party Ciudadanos has been the beneficiary of that collapse, markedly improving its results and drawing almost level with PP. This points to a battle between both parties for predominance in the right-wing spectrum.
  • The debut in Parliament of a populist, xenophobic and anti-European party, Vox, for the first time in Spain’s democratic history. Nevertheless, their final result has been inferior to what polls indicated and they will not hold the key to any vote. The right’s division into three parties has clearly damaged all of their prospects.
  • The victory of a pro-independence party in Catalonia for the first time in a general election (albeit, very closely followed by Partido Socialista) and an increase in the total number of pro-independence MPs compared to the previous term. This means that territorial tensions will definitely be an important part of the new Government’s agenda.

European “relief”

European institutions were holding their breath, fearing that Spain’s political landscape would become even more fragmented after the election, and thus prolonging political instability in the Eurozone’s fourth largest economy. The rise of a populist and anti-European party, which threatened to become part of a ruling coalition in Spain, was also regarded with great concern.

This explains why Sánchez received unprecedented endorsements in the run-up to the vote:

  • Just two days before the election, an editorial in Financial Times urged Spain to vote for Pedro Sánchez, arguing that the socialist leader deserved recognition for his moderate approach and explaining that an alliance between the three right-wing parties, including Vox, “would be full of contradictions and increase regional tensions”.
  • Previously, The Economist had “advised” Spanish voters to give Sánchez a majority so that PSOE could rule alone, arguing that Spain is currently facing a series of challenges which “a weak Government will not be able to resolve”.
  • During the election campaign, former Partido Popular Finance Minister and current Vice President of the European Central Bank, Luis de Guindos, praised the progress of Spain’s economy and highlighted that its slowdown would be more limited than in the rest of the Eurozone. He expects a GDP increase slightly over 2% this year, versus 1% forecasted for the Eurozone.

Spain as a key player in Europe

PM-elect Pedro Sánchez is fully committed to Europe. In his victory speech, he sent a clear message to Brussels: “We will form a pro-European government that will strengthen, not weaken, Europe”. In turn, EU Commissioner for Economic and Financial Affairs, Pierre Moscovici, responded with words of support: “Spain will not be easy to govern, but it has clearly chosen the European and reformist left”.

It is worth highlighting that the European election to be held on 26th May will coincide with municipal and regional elections in Spain, just one month after the national election. Therefore, it is very likely that the effect of PSOE’s recent victory will be extended.

Moreover, PSOE’s EU list will be headed by its current Minister of Foreign Affairs, Josep Borrell, who has a genuinely European profile and deep knowledge of European institutions, since he was President of the European Parliament between 2004 and 2007.

Thus, there is a possibility that, after 26th May, PSOE could become the main force within the European Parliament’s socialist bloc.

In addition, it is worth highlighting Spain’s positive macroeconomic context:

  • Despite having a high unemployment rate, job creation is progressing rapidly. This week’s figures have confirmed a decrease of 91,518 claimants, leaving the total at 3.16 million. In April, the Social Security registered 19,230,362 workers, the highest figure since July 2008, almost reaching pre-crisis levels.
  • The deficit level of Spanish public administrations dropped from 3.03% last year, to 2.63% of GDP, mainly thanks to a favorable revenue trend. This has allowed Spain to leave behind the EU’s excess deficit procedures, so the country will no longer be under the constant scrutiny of European authorities.
  • The Government has presented to Brussels its 2019-2022 Stability Program, along with a National Reform Plan, which includes a new macroeconomic framework with a growth forecast of 2.2% this year and unemployment rate under 14%, as well as an estimation of 2% public deficit reduction and 96% of GDP public debt ratio.

All of these elements place Spain, with PM Sánchez at the helm, as a leading presence in the EU and a key player in a much-needed relaunch of the European project.