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According to analysts at Danske Bank, Spain’s third general election in four years brought another shake-up in its political landscape as for the first time seeing the far-right Vox party joining the ranks of parliament.

Key Quotes

“It underperformed compared with the polls and its impact on policy-making will likely remain limited, with a  centre-left alliance of the Socialist party (PSOE), Podemos and regional Catalan and Basque parties coming within reach of a majority. The snap election bet clearly paid off for the PSOE, which gained some 39 seats compared with its previous 84, making it by far the largest party in the new parliament.”

“Focus now reverts to coalition-building, but a difficult task still lies ahead.  With the Catalan parties as king makers, the independence question could again take centre stage in the forthcoming negotiations.”

“Overall, we do not expect the fog on the political front to lift much before the EU Parliament elections at the end of May,  with politicians’ appetite for clear commitments likely to be muted before the voting.”

“Although a period of political uncertainty might lie ahead, we do not expect it to have major negative spill-over to the Spanish economy, which has been fairly resilient to previous such episodes.”

“We think Eurosceptic risks under a centre-left government including Podemos will remain small, as the party has moderated its rhetoric on that front in the past years. However, warnings from Brussels about a large fiscal expansion still have the potential to stoke renewed tensions.”

“As the election outcome was broadly in line with previous polls and the Vox party did not become a king maker in Spanish politics, we expect the market reaction to be muted.”