Spanish opinion polls are signalling that the Socialist party could win a large share of the vote in a snap election on April 28 – but not enough for it to govern alone.
Prime Minister Pedro Sanchez called the snap vote in February after Catalan independence parties withdrew their support for the government's budget bill. The move could have worked in Sanchez' favor, however, with opinion polls suggesting that his Spanish Socialist and Workers' Party (the PSOE) will gain far more parliamentary seats.
There are four major parties spanning the political landscape in Spain – the left-wing, ruling Socialists, the center-right People's Party (PP), far-left Unidos Podemos party and the liberal, centrist Ciudadanos (Citizens' Party). There is also now an upstart, populist newcomer in the mix – the far-right VOX party.
According to the latest opinion poll, the PSOE leads by a wide margin and is seen with 31.1% of the votes. Conducted between April 9-11 by social research firm GAD3 for La Vanguardia newspaper, the poll showed the PP trailed with 20.1% of the vote, Ciudadanos was seen with 14.4% and Unidos Podemos with 11.4%. Far-right Vox is seen closely behind with 11.2% of the vote.
A host of smaller parties, including Catalan independence parties, are seen with a smaller percentage of the vote while a large number of voters (26%) remain undecided as to who to vote for, and this could have a large impact on the final result.
As it stands, however, the Socialist Party is expect to win the highest number of seats (around 137-139 seats). But with 350 seats up for grabs in Congress, no one party will gain an absolute majority (of 176 seats) to govern alone so a coalition government is highly likely. That will involve horse-trading between the main parties and smaller partners.
The PSOE could have to rely on Podemos and secessionists in Spain, again, while a right-leaning coalition could be formed by PP, Ciudadanos and Vox. Whatever the outcome, the political scene is seen as highly fragmented.
A key date for voters could be April 23 when a debate between the main party leaders – Pedro Sánchez (PSOE), Pablo Casado (PP), Pablo Iglesias (Podemos), Albert Rivera (Citizens) and Santiago Abascal (Vox) – is televised.
Spanish Economy and Enterprise Minister Nadia Calvino told CNBC Friday that the Socialist Party wants to gain a majority this time.
"Our hope would be to have a strong majority that would allow us to go on with a Socialist government and a very balanced and responsible reform agenda," she told CNBC's Joumanna Bercetche during IMF Spring Meetings in Washington. She did not want to speculate "on other options" – that is, a coalition government – although that is looking a likely outcome.
Government formation could prove tricky, according to risk consultancy Teneo Intelligence. "In terms of government formation, polls continue to point to a gridlock scenario," Antonio Barroso, deputy director of Research, said in a note early April.
"With a right-wing alliance currently out of reach, Sanchez might be able to explore an agreement with both Podemos and regional parties, or with Ciudadanos. A key factor that could determine whether an alliance can be concluded is the relative fear of parties to new elections," he noted.
Whoever wins the election will have to focus on dealing with restlessness from secessionist parties in Catalonia and further bids for independence, managing a countering force of nationalist sentiment and the rise of anti-immigrant populism (that has drawn disaffected voters to Vox) and boosting the economy and job creation.
Prime Minister Sanchez has been accused of pandering to Catalan separatists by promising talks on independence if they backed his budget bill (they didn't) but said this weekend that he would act with "strength and proportion" against any attempt by Catalan separatists to repeat their 2017 push for independence, Reuters reported.
Spain experienced a banking crisis following the 2007/2008 global financial crisis, prompted largely by the bursting of a property and construction bubble in the country. The economy recovered in recent years, however, and economic reforms made under the previous PP administration (which collapsed in 2018 due to a corruption scandal and a no-confidence vote that ousted the PP's Mariano Rajoy) to make Spain more competitive were praised.
In its latest winter forecasts, the European Commission predicted a slight slowdown in gross domestic product (GDP) growth of 2.1 percent in 2019 and 1.9 percent in 2020. A slowdown was envisaged because of a predicted decline in private consumption, the commission noted, and risks posed by a more uncertain global economic outlook.
Noting that Spain's economic fundamentals are "robust," Economy Minister Calvino told CNBC that the Socialists aim to maintain reform efforts and to attract investment.
"We came to government in an unexpected manner because of the previous government being ousted because of corruption and so we came with a very clear mandate to do as much as possible to put the country on the right track and to show there can be a clean government, efficient management of public resources and a reform program for the future."
She did not believe a minority or coalition government would not be abnormal, in any case.
"Spanish society has shown to be very stable and I think this gives a good framework for any investor to bet on Spain," she said. How the next government approaches or maintains reform efforts is vital, according to one economist who is a member of the Popular Party.
"The key thing here is whether the (new) coalition … is going to support growth or it's going back to the policies of 2008," Daniel LaCalle, a chief economist at Tressis Gastion and an economic spokesman and candidate for the PP – the party that was in power up to June 2018 – told CNBC last week.
He added that the economic recovery in Spain was thanks to "very important reforms" made by the previous PP administration.
"Those reforms have been absolutely crucial to letting the country go from absolute devastation –there were more than 3000 jobs being lost a day at the peak of the crisis – to getting the country back on track," he told CNBC's Squawk Box Europe.
"Now that needs to be 1) cemented and 2) improved," he said. "The risk that the country is falling into is to think that all reforms have been done and nothing has to be done anymore or, even worse, that reforms have to be reverted and we go back to 2008 policies."