Spain has finished with its old political order. But the May 24 local and regional elections show that the insurgent and established parties are just at the beginning of the transition to the next era. While waiting for the mud to clear, investors are likely to stay nervous.
The read-across to the country's general elections later this year is somewhat limited, but some trends are clear. The elections, in 13 of the country's 17 regions and in all of its municipalities, confirmed the rise of two new parties, the radical left Podemos and more moderate Ciudadanos. The ruling People's Party still came in first with 27 per cent of all votes in local elections, but below the 37.5 per cent achieved in the spectacular 2011 count. The Socialist PSOE, with 25 per cent, was also down but less so. The share of the two traditional leaders declined from 65 per cent four years ago to 52 per cent.
If the old and new left, Podemos and PSOE, can get along, they could be in a strong position. Exhibit A of this possibility is the city of Madrid, which was a conservative fiefdom in the old order. In Sunday's election the PP did come out slightly ahead of a leftist platform backed by Podemos. But the leftists are expected to gain power, with PSOE support. However, PP could stay in power in Madrid's regional government, with the support of Ciudadanos, even though nationwide the new centrists did less well than expected.
The election was a setback for the Catalan independence movement, which until recently was considered a major threat to national stability by many investors. In Barcelona, the region's capital, a Podemos-backed coalition came in front of pro-independence party Convergencia i Unio (CiU). This weakens CiU before Catalonia's regional elections in September.
The election worried investors. The Madrid stock market fell and Spanish government bond yields rose. The coming negotiations over coalition governments will be followed by weeks of uncertainty and speculation. The political paralysis may delay investment decisions involving local or regional governments. The new political order will not be truly established before the November general election. Until then, the landscape looks as uncertain as ever.
The read-across to the country's general elections later this year is somewhat limited, but some trends are clear. The elections, in 13 of the country's 17 regions and in all of its municipalities, confirmed the rise of two new parties, the radical left Podemos and more moderate Ciudadanos. The ruling People's Party still came in first with 27 per cent of all votes in local elections, but below the 37.5 per cent achieved in the spectacular 2011 count. The Socialist PSOE, with 25 per cent, was also down but less so. The share of the two traditional leaders declined from 65 per cent four years ago to 52 per cent.
If the old and new left, Podemos and PSOE, can get along, they could be in a strong position. Exhibit A of this possibility is the city of Madrid, which was a conservative fiefdom in the old order. In Sunday's election the PP did come out slightly ahead of a leftist platform backed by Podemos. But the leftists are expected to gain power, with PSOE support. However, PP could stay in power in Madrid's regional government, with the support of Ciudadanos, even though nationwide the new centrists did less well than expected.
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The election worried investors. The Madrid stock market fell and Spanish government bond yields rose. The coming negotiations over coalition governments will be followed by weeks of uncertainty and speculation. The political paralysis may delay investment decisions involving local or regional governments. The new political order will not be truly established before the November general election. Until then, the landscape looks as uncertain as ever.