Spaniards are going to the polls on June 26th, for the second time in 6 months after the failure to form a new government. The stalemate in parliament between the mainstream parties, upstart parties and several small ones was expected to repeat itself in the second round of elections.
But a new development could result in a different outcome that could push Spain to a Left wing government, perhaps one that would challenge the European Union.
What’s going on in Spain
Spain’s election system is favorable to bigger parties over smaller parties. The idea is to make the system more stable and to have a higher chance of forming governments, similar to electoral systems in quite a few other countries. If the previous December 20th elections, both the ruling center-right PP and main opposition center-left PSOE received more seats in parliament than their direct proportion of the vote when comparing them to smaller parties. PPP got 123 seats and PSOE 90 seats.
Upstarts center-right Ciudadanos and left-wing Podemos also received a significant chunk of the votes but they were under-represented in comparison to the votes. Ciudadanos got 40 seats and Podemos (split into various regional affiliations) got 69 seats. And for smaller parties, the gap was even larger.
Outside these 4 parties, there are a lot of other parties labelled as “other”. Most of them are regional parties but one is an all-Spanish one: Izquierda Unida (IU). This translates into United Left. Despite receiving nearly 1 million votes, they were awarded only two seats instead of a theoretical 13 seats under a direct representation system.
After a deal between PSOE and Ciudadnos did not receive the necessary votes to form a new governments and various other political negotiations failed, the King dissolved parliament and announced fresh elections on June 26th.
Left-Left Coalition
And towards these elections, the United Left is en-route to unite with Podemos. The deal was pre-approved by IU as part of the preparations for the elections. The details are still under discussion and may always result in a failure. Nevertheless, such a truly united Left-wing front could change the direction of the country.
A Podemos-IU united front could result in surpassing the traditional center-left PSOE and perhaps even sweeping other voters. Podemos is the only major party open to a referendum about Catalan independence. This would garner support of more Catalan voters and later get internal or external support of Catalan parties for forming a new government.
Spain has been following the austerity policy of the European Union quite thoroughly. And while growth is high, so is deflation and the level of unemployment as well. Spain is the fourth largest economy in the euro-zone.
A shift to a government led by anti-austerity, anti-establishment forces could be another factor in destabilizing the mainstream in Europe, which is already troubled by the specter of right wing parties such as those in Austria and in France. It is also important to remember that the elections in Spain are held exactly three days ahead of the EU referendum in the UK. The specter of a Brexit is also near.
However, even if the Podemos-IU united list comes out stronger, it may not be enough for forming a new government. The center-left PSOE could choose to go with the center-right PP into a grand coalition, something that is seen in Germany and that the establishment in the EU wants.
In any case, this development in the left-wing of Spanish politics could have a big impact on European politics and the euro.
More: Clinton Continuation vs. Donald Disruption – how the US elections could impact the dollar.
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