Spain begins countdown to likely third election this year

Acting Prime Minister Rajoy faces confidence vote on Wednesday

The clock starts ticking on Wednesday towards what could be Spain’s third national election in a year when acting Prime Minister Mariano Rajoy faces a confidence vote in parliament for a second term.

Spain has been without a functioning government since inconclusive elections in December and June failed to hand a convincing mandate to any political party. So far, party leaders have been unable to agree on forming a coalition.

The eight-month political deadlock has delayed investments in infrastructure such as roads and rail and put government appointments on hold, leaving some Spanish embassies without an ambassador.

Rajoy’s centre-right People’s Party (PP) won the most votes in June’s election but lacks the majority it needs to win the vote even with support from centrists Ciudadanos (Citizens), Spain’s fourth-biggest party.

Refusal to support Rajoy

The opposition Socialists have refused to back Rajoy or smooth the way to a PP-led minority government by abstaining in a second confidence vote, which will be held on Friday if Wednesday’s ballot fails. In the second vote a simple majority will suffice to put Rajoy back in power.

The Socialists are unlikely to back down from that position given local elections in September in the northern regions of Galicia and the Basque Country where support for Rajoy’s PP could cost votes for the left-wing party.

Spain’s economy, on the rebound from a recession which ended three years ago, has powered ahead despite the lack of a functioning government, with the latest data showing strong growth fueled by consumer spending and demand for exports.

The acting government expects the economy to expand 2.9 percent this year - one of the fastest rates in the euro zone.

However, economists say growth could be even higher if political uncertainty was removed. “The lack of government is having a negative impact,” said Miguel Cardoso, an economist at BBVA, whose estimate of 3.1 percent for economic growth this year would be about 3.5 percent if there was a government in place.

His forecast for growth next year would be about 0.7 percentage points higher if there was a central administration in office to firm up public spending plans and provide certainty over policy for potential investors, he said.