Back In December, Spain held what turned out to be inconclusive elections.
To be sure, voters were clearly sick of the status quo. The country’s three decade old political duopoly was broken when PP and PSOE garnered their lowest combined share of the vote since the eighties.
Mariano Rajoy’s PP still won the most seats, but fell short of a majority and with a grand coalition comprised of PP and PSOE largely out of the question, the quest to build consensus and form a government has been stuck in the mud for two months.
Late last month, Rajoy delayed a confidence vote after failing to secure the support he felt he needed to lead and eventually, the PP chief threw in the towel altogether.
Now, it’s up to Socialist leader Pedro Sanchez to win the support of lawmakers who will vote for or against his program next week.
Podemos - the anti-austerity party led by firebrand Pablo Iglesias - put the entire effort in jeopardy on Wednesday by suspending negotiations with PSOE after Sanchez announced he would seek to create an alliance with Ciudadanos (the fourth place finisher in the December vote).
"It wasn't easy for the Socialist party and Ciudadanos -- which have different projects -- to be able to put what unites them... above what separates them," Ciudadanos chief Albert Rivera said yesterday.
“Sanchez and Rivera shook hands to applause after signing the agreement, which centres on what a new government led by the Socialists would look like,” AFP reports. “It includes proposals for major judicial reforms, including changing the constitution to modify rules governing lawmakers' immunity from prosecution [and] social reforms such as bringing back Spain's prized universal healthcare system, which has suffered from major spending cuts over the past years of austerity.”
Without the support of Podemos, the PSOE/Ciudadanos bid to form a government will likely fail.
Iglesias was willing to accept a deputy PM role in a government led by Podemos and the Socialists, but wants nothing to do with Ciudadanos. Meanwhile, PSOE is leary of Podemos if no other reason that Iglesias clearly has designs on making his party the ascendant leftist force in Spanish politics in the years to come. Making him deputy PM would bolster that effort.
(Iglesias poses for a picture while inexplicably peeking from around a tree)
"Podemos leaders want the Socialists to ditch Ciudadanos in favour of a hard left coalition government, and insist they have no intention of allowing Mr Sánchez to govern on the basis of a deal with the pro-business centrists," FT notes. "Lurking behind that stance is a strategic consideration: Podemos was founded to replace the Socialists as the leading voice of the Spanish left, not to serve as the party’s coalition appendix."
The Times goes on to note that Sanchez has seen his popular support rise over the course of the fraught coalition building process. That means he may be able to convince Podemos to through their support behind his program rather than explain to voters why the anti-austerity party shunned a fellow leftist party and effectively sided with Mariano Rajoy, whos austerity policies Iglesias has pledged to roll back.
March 5 is the deadline. If a government isn't formed by then, Spain will have to head back to the polls where PSOE would be playing from a position of strength.
As for the possibility that Iglesias will ultimately fold and support Sanchez, the PSOE's effort is "doomed to failure," Podemos promises.
"They're lying and they know it," a PSOE spokesman retorted.
So more political turmoil ahead in the periphery, turmoil which has the potential to rattle markets. But perhaps the most important thing to note about everything said above is this: a leftist-led government is now a virtual certainty. It's only a matter of what form it will take. That means the religious adherence to Berlin-style fiscal rectitude is going to come to a rather unceremonious end sooner or later. That, in turn, means the relative calm shown in the following chart may well give way to carnage by the end of the year.
Because if this is what "austerity" looks like...
...then we'd hate to see what happens under an "anti-austerity" platform.