Alberto Núñez Feijóo and Pedro Sánchez do not give up anything. The leader of the Popular Party and winner of the elections on July 23, has given the 137 seats in the Congress of Deputies for get, after the Electoral Board of Madrid concluded the recount of the votes of residents abroad, the one known as the CERA vote. However, the result must confirm the general scrutiny, which is still pending. And the PSOE “has taken advantage” of this situation, which has claimed that the 30,302 invalid votes were reviewed, according to Europa Press. Thus, the provisional data gives a result of 41.09% of the vote for the PP (1,463,112 votes) and 28.21% for the PSOE (1,004,567 votes), granting 16 seats to the first and ten to the second.
Despite the fact that the PP has obtained more deputies, the political slowdown became evident due to the difficulties of forming a stable government in the country. This has been considered by the rating agencies and various investment firms, which throughout the last week have warned that the period of political uncertainty could affect the disbursement of European funds, in addition to the challenges and future reforms of the economy in Spain. Analysts and economists have spoken these days about the consequences of this political situation for the economy, especially if one takes into account that starting next year the fiscal rules -suspended during the coronavirus pandemic- will return to the Union European. And to all this is added the role that the future Spanish Government must play in the Presidency of the Council of the European Union, which began on July 1 and will last until the end of this year.
One of the first agencies to put the situation on the table after 23-J was S&P Global Ratings, which highlighted the possibility of a “potential” repetition of elections, which could jeopardize the implementation of some reforms framed in the National Recovery and Resilience Plan and therefore, the corresponding disbursement of funds. Spain, according to Europa Press, has already received 37,036 million euros, which is equivalent to 53% of the total that corresponds to it in the form of non-refundable transfers, which increases a total of 69,528 million euros in the Recovery Plan. The acting Executive expects two payments to be made during this year, one of 10,000 and another of 7,000 million, which would join another of 8,000 million in 2024, one of 3,500 million in 2025 and the last of 4,000 million for December of 2026
However, the credit rating agency DBRS Morningstar does suspect that the political slowdown may “hinder” the approval of the PGE and also believes that it could “complicate” a rapid execution of the Recovery Plan, as well as the disbursement of the funds. EU funds and even slow down the “necessary” tax reform. Although DBRS does see a slowdown in the economy, it is confident that it will outpace growth in other European regions this year and that overall economic growth will remain stable.
The fiscal rules, in the eaves
For its part, the credit agency Moody’s assured two days after the elections that the political deadlock and uncertainty would weaken the authorities’ ability to face the fiscal challenges posed by the EU. The agency highlighted that in this scenario the political parties have shown themselves “reluctant” to address the challenges of the country’s public finances and therefore predicted that reaching the budget deficit target of 3% of GDP will be necessary and demanding, as well as continuing healing public finances. And he recalled that the restoration of tax buffers during good times is a key aspect of the current debate on the reform of European tax regulations. Lastly, it warned of the risk that political uncertainty lingers over time for the future credit profile of Spain, although Moody’s acknowledged that the economy maintains greater resistance and greater susceptibility to event risk than during the financial crisis of year 2008.
Election repeat?
Next Generation and “prolonged uncertainty” in a scenario of electoral repetition. The analyst also ruled that the Spanish would most likely return to the polls at the end of this year or at the beginning of next, which he attributes to warning, in addition to a delay in the arrival of EU funds, of a “prolonged uncertainty “On the economic level.
Uncertainty may delay disbursement of Next Generation funds
Who also spoke about the uncertainty that this post-electoral scenario could cause was the director of public and sovereign ratings at Scope Ratings, Jakob Suwalski, who thought that the future government would be structured in an environment of “fragility” and difficulties in executing various economic reforms during the legislature. “Given this backdrop, Spain, which presides over the Council of the EU until the end of the year, faces a prolonged period of uncertainty,” said the economist, who warned that any future Executive will foreseeably have “more difficulties in applying policies and long-term reforms, having to navigate the complexities of coalition politics.
The economy, despite everything, stronger than in 2008
However, not all rating agencies have ruled on the risk key choices. For example, the investment bank Goldman Sachs expressed its confidence in the resilience of the Spanish economy, which, in its opinion, continues to be greater than that of the rest of its European neighbours. And all this, regardless of the political future that comes after the elections. According to Goldman’s Current Activity Indicator, the country “seems to be well-positioned to address these challenges, even if the electoral process is inconclusive.”
On the other hand, the chief economist of Axa IM, Gilles Moëc, also expressed his confidence in the health of the Spanish economy in the face of the coming months of political slowdown. The analyst said in a report, which is also collected by Europa Press, that although the Spanish political situation has not gained stability after the elections, its underlying position “is probably solid enough to help get through a few more months of uncertainty” if there is to hold new elections, to add that Spain “can continue to be at a certain distance from the first positions of our concerns”. However, he added that “not everything is rosy in Spain”, to remind that, although the deficit was under control, public debt will probably reach 111% of GDP this year, while the rise in interest rates will make the tax formula more difficult to solve in the coming years.
Feijóo gives for gets the 137 seats after the wax
On the more political level, Feijóo already gives 137 seats for getting after the CERA vote was counted. The ‘popular’ leader, through a publication on the Tiwtter social network, has insisted that the PP is the “most voted” formation and that its objective is “to work to fulfill the mandate at the polls.” “The CERA gives one more deputy to the PP and we reached 137, 16 more than the next force. Thanks to all the Spaniards abroad who want a Government of moderation and a sense of State”, he has stressed.
The wax gives one more deputy to the pp and we reached 137.16 seats more than the next force.
Thanks to all the Spaniards abroad who want a government of moderation and a sense of State.
We are the party with the most votes and we work to fulfill the mandate of the polls.
– Alberto Núñez Feijóo (@NunezFeijoo) July 29, 2023
Meanwhile, the acting President of the Government, Pedro Sánchez, maintains confidence in his investiture, as he expressed during the meeting of the Socialist Executive held on July 24. For the moment, the ranks of the PSOE remain calm, although the formation of a government is not easy. Even more so now, when he needs the ‘yes’ from Junts to govern. And Carles Puigdemont has already warned: not to give his support for nothing.
