6 January 2016

Rajoy calls for three-way alliance with Socialists and Ciudadanos

The Christmas period, which ends today with the Día de los Reyes (the Three Wise Men’s Day), has not stopped talks over the formation of the new government in Spain. Frankly, however, things are not looking any easier than on 21 December – the day after the inconclusive Spanish general election. If anything, re-run elections are looking increasingly likely almost by the day.

In an interview with Cadena COPE yesterday, acting Prime Minister Mariano Rajoy called on both the Socialist Party (PSOE) and the centrist newcomer Ciudadanos to back a government led by him in order to work on “some of the big reforms Spain needs.” From Rajoy’s point of view, this is a logical move – as I wrote in my analysis of the election results. He was never going to let PSOE leader Pedro Sánchez sit on the fence indefinitely.

Sánchez between a rock and a hard place

Pressure is therefore piling up on Sánchez – who seems to be running out of good options quickly. A grand coalition with Rajoy’s Partido Popular (PP) would essentially mean political suicide for PSOE. In addition, a few influential Socialist regional leaders – notably including Andalusia’s Susana Díaz – have categorically rejected an alliance with the anti-establishment Podemos as long as the latter continues to support a binding independence referendum in Catalonia.

Needless to say, this ‘neither PP nor Podemos’ line would make re-run elections inevitable. At that point, Sánchez would likely have to give way to a different Socialist candidate and PSOE may well fare worse than in the 20 December election anyway – Rajoy would spare no effort to blame the Socialists for failure to form a new government.

Potentially, the ‘third way’ for PSOE could be to abstain in the initial confidence vote and let Rajoy enter office with a minority government. In theory, this would give the Socialists greater influence – as PP would need their support to pass legislation. It would also shield PSOE from accusations of acting irresponsibly by pushing Spain towards re-run elections. However, this option has also been ruled out by PSOE for the time being – and it remains unclear whether Rajoy would agree to anything less than a fully-fledged coalition. More generally, while it would avoid re-run elections, this would hardly be a stable solution in the longer term. Ultimately, even if PSOE abstained from the initial confidence vote, it would face pressure to back Rajoy every time legislation needs to be passed. It is easy to see how such an arrangement could quickly run into trouble.

How could Catalonia come into play?

So far, the main hurdle to an alliance between PSOE and Podemos has been the latter’s willingness to allow a binding independence referendum in Catalonia. Similarly, this appears to be the key reason why Ciudadanos has said that it would vote against any government involving Podemos. However, the political scenario in Catalonia could be changing in the coming weeks – and this might have an impact at the national level.

On Sunday, the Catalan anti-system separatist party CUP confirmed its opposition to Artur Mas being re-elected regional President. Unless an eleventh-hour deal can be sealed by 10 January, snap regional elections will have to be called. The impression is separatist parties are on the verge of squandering a huge opportunity – the closest they have come to a mandate to pursue independence is about to be lost due to internal disagreements. They could well pay a price for that if new regional elections are held. As such, the Catalan independence drive could be seen as less of a pressing issue by parties in the negotiations over the formation of the national government.

So what could it mean in practice? Let me try and draw out the following – admittedly very hypothetical – scenario. Podemos could drop its independence referendum ‘red line’ and put greater emphasis on social issues when setting out its conditions for a pact with PSOE. Ciudadanos could then consider abstaining in the initial confidence vote and allow a PSOE-Podemos government to enter office. At the end of the day, all three parties have been campaigning on the need for ‘change’ in Spanish politics. In other words, with the Catalan stumbling block (somewhat) out of the way, perhaps Rajoy’s worst nightmare could start looking like more than just fantasy politics material.

That said, this is all very speculative and several big questions would certainly arise. Would Podemos be prepared to give up on such an important pledge with a new Catalan regional election on the horizon? Why would the party led by Pablo Iglesias want to prop up PSOE, instead of having a go at overtaking them as the main left-wing party in Spain in a re-run general election? And so forth. Furthermore, any changes in Catalonia may not come soon enough to salvage the flagging negotiations over the new national government.

Re-run elections sooner or later?

Where does all this leave us? At the end of the day, the bottom line is that something has to give or it will be simply impossible to put together a new government. If everyone sticks to their ‘red lines’, Spain is bound to fresh elections fairly soon – with no guarantees of a radically different outcome from what we saw last month. Even if an agreement is reached to have some form of minority government led by Rajoy, doubts over its sustainability would remain. For example, could such a government ever pass a budget which involves further cuts? All of this points to further uncertainty for Spain, definitely in the short term and possibly in the longer run too. The big question is whether or when this might start hampering the economic recovery underway.