This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Spain will return to the polls for new national elections on 26 June, after December’s election resulted in no political party gaining enough support to form a government. The People’s Party (PP) ended up with the most seats, gaining 123 of the 350 seat parliament, followed by the Socialist Workers’ Party (PSOE) with 90 seats and anti-austerity party Podemos with 69 seats. The liberal and centrist Ciudadanos, or Citizens, party won 40, with the remainder going mainly to nationalist parties.
The Spanish electoral system requires an absolute majority of the House – 176 votes – to be able to appoint a Prime Minister. The two biggest parties have dominated Spanish politics since the early 1980s, but they both suffered heavy losses in December’s election as the impact of the financial crisis and years of subsequent austerity fractured the electorate. It is also possible to form a government with a simple majority — that is more votes for than against.
In December, the People’s Party and Ciudadanos had 163 seats combined, below the number necessary for an absolute majority, while the sum of the PSOE, Podemos and the post-communist Izquierda Unida party was 161. After various negotiations, the PSOE and Ciudadanos with 130 votes combined tried twice to form a government by simple majority, but this was blocked by the People’s Party, Podemos and other nationalist parties.
On 3 May, Spain’s King Felipe VI was forced to dissolve parliament and call new elections.
Despite those months of failed negotiations, uncertainty and absence of government, Spain’s equity and debt markets traded in line with movements seen in other European markets. That suggests the local markets are immune to political risk.