Search ForexCrunch

Mariano Rajoy, acting Spanish Prime Minister, has promised EU Commission President Jean-Claude Juncker that he will enact necessary adjustments, aka austerity measures, once the elections are over. This doesn’t look good.

This is in clear contrast to  the promises he makes in public and to the positive picture his party projects about the economy. He has also been criticized for making promises  before actually winning the elections and while presiding over a temporary government.

Juncker has let Spain off the hook: the country did not meet its budget deficit targets but the Commission did not punish it. This is seen in Spain as lending a helping hand to Rajoy. Both Juncker and Rajoy are center-right politicians.

One of the reasons for the deficit is some tax breaks. These were presented as a proof of economc success by the Rajoy administration.  With this letter to Juncker, many fear that the tax cuts will turn into tax hikes once Rajoy is returned to power not as acting PM but  presiding over a new government.

An absolute majority for Rajo’s PP is unlikely, but a grand coalition with the center-left PSOE is never off the  cards. The fiercest opposition comes from the more radical left coalition Unidos Podemos, which could beat the traditional left for second place.

Spaniards went to the polls on December 20th but the resulting hung parliament did not manage to form a new government. Fresh elections are coming on June 26th.  The troubles in the euro-zone’s fourth largest economy join other signs of  discontent across the old continent. Austria narrowly rejected an extreme-right president, protests are spreading around  France and Greece’s debt is a never-ending story.

And of course, 3 days before the Spanish elections, Brits go to the polls to decide if they are in or out of the EU.

More:  Eurogroup likely to defer decision instead of deferring Greece’s debt