ASSESSMENTS

Why Spain's New Coalition Will Struggle to Govern

Jan 8, 2020 | 09:30 GMT

A photo of Spain's Congress of Deputies building.

Spain's Congress of Deputies building. Spain's new coalition government faces a fragmented political landscape, a slowing economy and unresolved secession disputes in Catalonia.

(b-hide the scene/Shutterstock)

Highlights

Spain will be governed by an untested coalition that does not control a majority in parliament, which will render the policymaking process more complex and limit the new government's effectiveness.
The Spanish economy is slowing, and a combination of risk factors (from ongoing trade disputes with the United States to unresolved secession disputes with Catalonia) will contribute to even slower growth in 2020.
Companies operating in Spain will deal with greater fiscal pressures and a government that will seek to backtrack on some of the labor market reforms that were introduced during the peak of the economic crisis in the early 2010s.

Spain has just appointed its first coalition government since the return of democracy in the late 1970s, but the new government will struggle to pass structural reforms at a time of growing political fragmentation and slowing economic growth. Prime Minister Pedro Sanchez, who won a vote of investiture in parliament on Jan. 7 and will lead a coalition between his center-left Socialist Party and the left-wing Unidas Podemos, will have to deal with a worsening economic environment, a precarious labor market and secession pressure from Catalonia. Companies operating in Spain, for their part, will face higher taxes and the reversal of some of the market-friendly policies that were introduced during the peak of the economic crisis in the early 2010s....

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