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“Pedro Sanchez, the leader of the socialist party PSOE, is the new prime minister of Spain after his no-confidence vote against Mariano Rajoy passed in parliament. We expect the economic impact to be low in the short-run,” note ING Research Team in a recently published article.  

Key quotes

“Sanchez said he wants to keep the 2018 budget and to continue to follow the stability programme presented by the previous government under the European semester, at least for this year. He will try to pass the 2019 budget and he does not want new elections.”

“The just-ousted government, led by Rajoy, was also a minority government with 134 seats in a parliament of 350 and governing was already difficult. As the PSOE only has 84 seats and there is no talk of a formal coalition, it will be even more difficult to govern. Officially, new elections are planned in 2020. But given the weakness of the new government, a snap election in the coming months is more likely.”

“The Spanish-German bond spread rose only a few basis points after the announcement and is still close to 50bp lower compared to  Monday  on the back of more favourable recent political developments in Italy.”