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Spain – Minority Government on Borrowed Time

After 300 days and two elections, the country’s electoral deadlock was finally broken in late October, when Mariano Rajoy, the leader of the center-right PP, securing parliamentary backing to form a minority government, with the rival center-left PSOE abstaining.
For many voters, the outcome represents an unwelcome continuation of the status quo. The corruption-tainted prime minister remains deeply unpopular with more than one-half of an electorate that was subjected to painful austerity measures as the price for a bailout of the national banking system. However, the emergence of two new parties—the centrist C’s and the anti-austerity Podemos—in the ideological gaps on the political spectrum has contributed to both numerical and ideological obstacles to forming a stable majority government.
Rajoy’s new Cabinet is younger than his previous one, and includes six new faces among the 13 members. The appointment of Spain’s ambassador to the EU, Alfonso Dastis, as foreign minister reflects both the government’s commitment to European integration and a desire to play a prominent role in the upcoming Brexit negotiations. Likewise, the creation of a new portfolio for Territorial Administration, which will be overseen by Deputy Prime Minister Soraya Sáenz de Santamaria, is an indication that Rajoy is keen to avoid a renewed flaring of tensions between the central government and the pro-independence regional government in Catalonia at a time when the stability of his government is uncertain.
Although the PP controls just 137 seats in the 350-member Parliament, Rajoy can probably count on the fairly reliable support of C’s. While that will still leave the government a handful of votes shy of a bare majority, the PSOE is currently leaderless and divided, and can be expected to take whatever action is necessary to prevent another election until the party is prepared to contest one.
That is not to say that the Socialists will avoid a fight. In December, the government presented a budget for 2017 that was formulated on the basis of a previous agreement with the EC to hold the general government budget deficit to no more than 3.1% of GDP this year and 2.2% of GDP in 2018. However, gaining the support of the PSOE required some revisions, notably an 8% rise in the minimum wage and a 0.25% increase in pension benefits, concessions that prompted the EC to revise its 2017 forecast for the deficit up to 3.3% of GDP.
Although a strong economic performance will facilitate the deficit-reduction process, it is highly probable that coming close to those targets will require additional spending cuts and/or tax increases, and Rajoy will not be able to count on the cooperation of the PSOE once the Socialists feel confident enough to risk provoking a snap election.
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