In Spain’s election, the winner is … nobody

Without a viable coalition, the country may have to vote again “I told him there is zero chance of an agreement”

The puzzle of the Spanish elections remains unsolved. The voting on Dec. 20 failed to produce a clear winner after four years of majority rule by Prime Minister Mariano Rajoy’s conservative People’s Party: The PP led the pack with 123 seats in the lower house of Parliament; the socialists got 90; Podemos, a new farleft party, got 69; and the free-market Ciudadanos party got 40. None

has the majority needed to form a government on its own.

Rajoy is calling for a broad coalition of the PP, the mainstream socialists, and Ciudadanos. The socialists are balking. “I told him there is zero chance of an agreement,” socialist party boss Pedro Sánchez said at a news conference after meeting with Rajoy on December 23. Yet the socialists won’t form a government with Podemos because Sanchez’s party opposes a referendum in Catalonia on independence for the region, while Podemos supports it.

The post-recession economy, though expanding, is still fragile. It will not get any direction without a government to guide it. The PP says its signature policies—reducing taxes and making it easier to hire and fire workers—risk being reversed by a left-wing coalition. The Left says Spain needs investment in social services after four years of austerity. For now, cheap oil, low interest rates, and a weak euro should drive Spain’s recovery a while longer, whatever the politicians do.

Increasingly the most likely option may be fresh elections by April or May, because the chances of a viable coalition emerging anytime soon seem remote. Some analysts see repeat elections as an advantage for the PP, which could play on popular fears of leftist policies to pick up enough votes—and seats—to form a government.

Amid the political uncertainty, the country’s tough budget-deficit targets are at risk. They were imposed on Spain by the European Commission, the executive arm of the European Union, as the price of a euro zonefinanced, €41 billion bank bailout in 2012 ($44 billion today). Three of the four biggest parties in the new Parliament promised voters they’d persuade the EC to ease Spain’s budget limits. Rajoy’s PP insists it will meet the current goal of a 4.2 percent budget surplus, even though it never has. The EC says in 2016 Spain will again spend more than it’s budgeted, by more than €8 billion.

The bottom line Although Spain’s conservatives lost the confidence of most voters, they still have a chance to win if new elections are held.