After close to six months of political paralysis and tension over who should form a government, King Felipe VI of Spain signed a decree on Tuesday to dissolve Parliament and hold a rerun of national elections for the first time since the country’s return to democracy in the late 1970s.
December’s elections ended inconclusively, with no party winning enough seats to form a government and none able to reach a sufficiently strong coalition deal, marking an end to the traditional dominance of Spanish politics by the centre-right Popular Party (PP) and Socialist PSOE which lost votes to the new left-wing anti-austerity Podemos movement and centrist Ciudadanos (Citizens) party.
The repeat election is now scheduled for June 26. Spain has never had a repeat election since it returned to democracy in 1975 and opinion polls suggest that there is little change in support for any of the four parties since the last poll in December.
Since the last election, Spain has been administered by a caretaker government led by the conservative Popular party leader, Mariano Rajoy, who is hoping for a second term as prime minister. Rajoy’s party came first in the December vote with 123 seats, but lost the majority it had held since 2011.
While the politicians play coalition-building games, Spain continues to face some serious economic problems. The Spanish economy is the fifth-largest in the European Union, and the fourth-largest in the Eurozone. But recent reports show that the country is poorer than it was nine years ago, and one in five workers are without a job. Growth is decent at 3.4% a year, but it is slowing and the last deficit target was missed last year, leaving it at 5%.
Everything in the country seems to beg for updating. Their under-performing education system needs new curriculum laws, political boundaries must be formulated and the new “sunshine tax,” a stab at the country’s climate control with solar panels replacing the old electric system, still awaits approval.
Positive data on Wednesday, however, showed that the Spanish economy has shown fresh signs of resilience in April with unemployment dropping more than predicted and economic activity, especially in the services sector, coming in better than expected before the June election. The number of Spaniards out of work has dropped by approximately 83,600, more than the forecasted 81,700.
The Spain Markit Composite PMI index jumped to 55.2 in April, and the Spanish economy showed continuing momentum in the first quarter, accelerating more than expected despite the absence of a permanent government.
Spain has been helped over the last year by outside factors such as falling oil prices which have boosted disposable income. Record-low interest rates and the recent decline of the euro have managed to pull Spanish businesses out from under and a string of terror attacks in countries such as Egypt, Turkey and Tunisia has diverted tourist flows to Spain, providing a much needed boost to one of the country’s most important sectors.
According to Rajoy, Spain’s economy could grow closer to 3 percent in 2016 if the current momentum continues. The administration’s latest official forecast calls for 2.7 percent expansion this year, while the European Commission sees growth of 2.6 percent. If that prediction materializes, Spain will be one of the fastest-growing nations in the Eurozone once again, outpacing the likes of Germany, France and Italy, as it did last year.
But analysts question Spain’s ability to maintain continued growth if the next elections fail to resolve the political deadlock and the country’s political elusiveness extends into the second half of the year.