Spain has a new leader but many analysts believe he will not stay in power until the end of his mandate, potentially raising further uncertainty for market participants.
Pedro Sanchez, leader of the Socialist Party (PSOE) became prime minister last week. This after he received support from anti-austerity and nationalist parties to oust the former leader, Mariano Rajoy, over a corruption scandal involving members of the Rajoy's Partido Popular (PP) party. However, the instability of this socialist executive is leading many to predict a snap election before the current mandate ends in July 2020.
"We see only limited chances for the new government to stay in power until 2020," Johannes Mayr, who conducts investment research at Bayern LB in Germany told CNBC Tuesday via email. He pointed to snap election at some point in 2019.
The Canadian credit rating agency DBRS also said Friday that it "expects PSOE to lead a transitional government, with limited ability to steer policies in a different direction in the short term, and to eventually call for early general elections in the coming months as it faces difficultly in legislating."
One of the main stumbling blocks is the lack of parliamentary majority. Sanchez's party has only 84 of 350 seats. The vote of no-confidence on Rajoy last week received the support of 180 lawmakers, thanks to several fringe parties. On Monday, the now opposition party Partido Popular threatened to use its majority in the Senate to block a vote on the country's budget later this year.