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27/09/2016

Spain to return to polls in June as economic pressure mounts

Elections

Spain to return to polls in June as economic pressure mounts

King Felipe [European Commission]

Spain’s King Felipe said yesterday (26 April) he would not put forward a new candidate to seek the confidence of parliament and become Prime Minister, a move which paves the way for a new general election in June.

The king said in a statement that none of the political leaders he met on Tuesday had enough support to secure a parliamentary majority.

Spain’s acting Prime Minister, Mariano Rajoy, said he had told King Felipe he still lacked the necessary support to be re-elected, leaving the monarch with no other option than to call for a new general election for June.

Earlier on Tuesday, Socialist leader Pedro Sanchez had also said he was not in a position to seek the confidence of the parliament and that a new vote was inevitable.

Rajoy predicts new Spanish poll

Acting Prime Minister Mariano Rajoy on Thursday (18 February) said Spain would “most likely” hold new elections on 26 June after months of political deadlock.

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The development hardly comes as a surprise. Last February, Rajoy said Spain would “most likely” hold new elections on 26 June after months of political deadlock.

Rajoy’s conservative Popular Party (PP) won the most seats, but lost its absolute majority in parliament in the election, which left the assembly fractured with four main parties — none with enough seats to govern alone.

Spain’s Socialist chief, Pedro Sanchez, whose party came second in the 20 December general election, was nominated by King Felipe VI earlier in February to negotiate a coalition after Rajoy declined an offer from the monarch to lead the first round of coalition talks.

It is now official that such attempts have failed. The Popular Party and the Socialists have refused to support each other.

Spain takes step toward grand coalition

Spanish political parties are poised to name a Socialist lawmaker as parliamentary speaker today (13 January), in the first pact between rival forces struggling to form a government after an election last month.

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EU may fine Spain for missing budget targets

The European Commission is considering penalizing Spain and Portugal for missing budget deficit reduction targets but is also likely to give them more time to bring their budget gaps within EU limits, officials familiar with the issue said.

That would be unprecedented in the two decades since such rules were introduced ahead of the launch of the euro.

The Commission could recommend, however, a symbolic sanction only so that fines, which can be up to 0.2% of gross domestic product (GDP) – or €2.16 billion for Spain and €359 million for Portugal – would be set at zero.

“There is a chance that the Commission could recommend sanctions and at the same time recommend that they are reduced to zero percent,” one official said.

Such a solution would signal the European Commission’s readiness to apply the rules and increase pressure through political embarrassment but avoid the economic impact on a country already struggling economically of having to pay a fine.

Under EU budget laws, the executive is in charge of policing the budgets of its 28 members to make sure they improve each year in line with recommendations set by EU finance ministers.

Commission unconvinced by Spain's deficit reduction efforts

The deficit reduction measures announced by Madrid are “a step in the right direction”. But the Commission is not convinced they will solve Spain’s economic problems. EurActiv Spain reports.

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The rules were sharpened in 2011 to make financial sanctions for rule-breakers more automatic and harder to circumvent through political alliance-building as had happened in the past.

In the EU, governments cannot run budget gaps higher than 3% of GDP or debts higher than 60% of GDP, and must cut their structural deficit – a measure that strips off business cycle effects and one-offs – by 0.5% of GDP every year until they come close to balance or into surplus.

Spain was asked by EU finance ministers to cut its deficit to 4.2% of GDP last year, from 5.9% in 2014, but verified data last week showed it ended up with a 5.1% shortfall instead. Spain’s 2016 deficit was to be 2.8%t.

Because the slippage is so big, the extension that Spain would get could be more than one year, officials said.

Guindos: Growth is more important than few decimal points of deficit

“Given the global situation, the most important thing is economic growth”, Spain’s Economic Affairs minister, Luis de Guindos, said after the Ecofin council on Friday (12 February).

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The European Commission is to issue its recommendations on whether to fine both countries in the second half of May, but no decision has been taken yet.

Officials said some in the EU executive arm were against sanctions.

“Pressures on both sides are quite even right now,” the official said.