June 1, 2018 / 10:54 AM / a year ago

Breakingviews - Spain can survive Frankenstein government

Spain's Socialist (PSOE) leader Pedro Sanchez smiles from his seat before the final day of a motion of no confidence debate in Parliament in Madrid, Spain, June 1, 2018. REUTERS/Sergio Perez

LONDON (Reuters Breakingviews) - Spain can survive its Frankenstein government. A no-confidence vote in Prime Minister Mariano Rajoy has replaced his weak minority administration with one stitched together from a hodgepodge of disparate parties. At least the economy is growing and fresh elections could produce a more stable outcome.

Rajoy survived a euro zone bailout, an election that left him with a minority government, and a separatist uprising in Catalonia. But a corruption scandal that saw members of his party sentenced - and the prime minister’s testimony discredited - finally prompted Socialist opposition leader Pedro Sanchez to call the no-confidence vote.

Centrist group Ciudadanos refused to back the motion because it wants early elections. Sanchez therefore relied on support from smaller parties, some with radical elements: the left-wing Podemos, Basque nationalists, and separatists in Catalonia. These groups will now prop up what is being dubbed a Frankenstein administration.

Superficially, Spanish politics is starting to look a bit like Italy’s, where two radical parties have joined forces to form a government, and may drag the country out of the single currency. But there are important differences. The Socialists have even fewer parliamentary seats than Rajoy’s People’s Party, making it hard for Sanchez to do anything bold. And if the government fails, fresh elections would favour the centrist Ciudadanos, which has seen its support soar in recent months. A coalition with one of the other large parties would give Spain the stable, reform-minded government it has lacked since 2015.

The euro zone’s fourth-largest economy could certainly do with firmer leadership. Despite cleaning up its banks and pushing through austerity during the 2011 crisis, Spain needs more help. Unemployment is still 15 percent and the labour market is split between those with permanent jobs and the 27 percent of workers who are on temporary contracts.

At least growth is robust. The European Commission expects Spain’s gross domestic product to expand by 2.9 percent this year, and its fiscal deficit to shrink to 2.6 percent of GDP. Yields on 10-year government bonds are lower than in March. Doubts about whether Italy will stay in the euro zone are probably a bigger threat to Spain than its freakish government.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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