Why Spain Cannot Seem to Elect a President

Have you ever watched the movie Spanish Affair? The story follows Rafa. He is a full-blooded Andalusian — from southern Spain — who has never left his home region.

That is until he meets Amaia, who lives in the Basque country — in northern Spain.

He follows her back home. After a series of misunderstandings, Rafa has to pretend he is a Basque. To win Koldo’s — Amaia’s father — approval.

The movie had unprecedented success, which led to the second part, Spanish Affair 2.

In the second part, Amaia and Rafael have broken up.

Rafael has gone back to his old life in Seville. Until one day, Koldo comes looking for his help.

Amaia is about to make the biggest mistake of her life. Even bigger than marrying an Andalusian. She is marrying a Catalan!

Koldo and Rafa travel together to Catalonia to stop the wedding.

Most of the movie takes place in a Catalonian country house — where the groom’s grandmother has lived in seclusion for years. She thinks that Catalonia has achieved independence from Spain.

A little white lie the groom has told her to keep her tension low.

Both comedies were a huge success. The success was due to the great jokes that differentiate Spanish regions.

But it was also successful because they touched on a deeper subject.

Both the Basque country and Catalonia have long been struggling for independence from Spain.

And this issue became evident after the Spanish presidential elections last December 2015.

You see, since the death of the dictator Francisco Franco in 1975, Spain has had a two party system. The PP (Popular Party) and the PSOE (Socialist Party).

But in the last two years, two parties have disrupted the political scene.  Podemos (We Can) and Ciudadanos (Citizens) changed its landscape forever.

Ciudadanos is a socialist democrat party led by a young lawyer, Albert Rivera. The Catalonian party’s main characteristic is that opposes Catalonian independence. The party has been around for a while, but has only recently become more prominent.

But Podemos is the complete opposite. Its pony tailed leader, Pablo Iglesias, is a former university political science lecturer. A group of intellectuals, cultural personalities and regular citizens formed the party. The party seeks to address the inequalities that have developed since the economic crisis.

Since its formation two years ago, Podemos has exploded in popularity.

Its two unique strategies explain the phenomenon of Podemos. They present themselves as normal people. And they accuse the current politicians of being a corrupt ‘caste’.

For the last presidential elections, there were four candidates instead of two.

And this brought a nightmare scenario for the PP and PSOE. Neither could get majority.

The results came in the following in order: PP, PSOE, Podemos, and Ciudadanos.

So neither of the major parties could govern without joining forces with Podemos.

All parties had a deadline of three months to negotiate and form a joint government that would have over the majority of votes.

PP was unable to reach an agreement with any of the political parties. PSOE was able to reach an agreement with Ciudadanos. But they still needed Podemos to reach the majority.

PSOE and Podemos, both eager to govern, initiated dialogue. But there was one issue in which they could not agree.  And this item was non-negotiable for both parties.

This was the matter of holding an independence referendum for Catalonia.

The three other parties had defended the unity of Spain during the campaign.

But Podemos had promised that if they won elections they would hold a referendum.

Let’s be clear, Podemos is not offering Catalonians independence, but the right to choose. And that won them many votes in the area.

You see, Podemos understands one thing. That is, if they have a referendum, Catalonians will most likely vote for remaining in Spain. But the longer they are denied the right to choose, the more that the independence movement will grow.

The reason why the other parties will not negotiate on that front is that Catalonia makes up 20% of Spain’s GDP. And its workforce contributes to 17% of the already ailing public pension plan. If Catalonia decided to leave, Spain would lose most, if not all, of this wealth.

And there is also the fear that if Catalonia has a referendum, the Basque country will want one too. The Basque country comprises 10% of Spain’s industrial GDP and is ranked second in GNP per capita.

So this issue deadlocked negotiations.

It has now been six months since the presidential elections. And Spain has not been able to elect a president.

This Sunday they will be holding the second elections. All parties have promised that there will not be a third.

But the results are up for grabs.

Since the last election, Podemos has gained ground. They have united with a minor Leftist party, and have agreed to pull their votes together. Polls now predict they will be snatching second place in the election from PSOE.

And there is the Brexit. Which may have an influence on people voting for the traditional PP in search for stability.

One thing is clear, with Spain’s high debt and unemployment, whoever wins will have a tough job ahead.


Selva Freigedo,
For Markets and Money

PS: Selva recently joined the Port Phillip Publishing team as our macroeconomic analyst. She works closely with Markets and Money editor Vern Gowdie on his advisory service, The Gowdie Letter.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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