(Bloomberg Opinion) -- On Tuesday, Spain is likely to get its first coalition government since its return to democracy in the 1970s. Whether it can work isn’t only a test for the country’s fragmented political system and strained unity; it’s an experiment that Europe’s floundering center-left parties will be watching to see if they can form viable alliances with the more radical left.
The formation of the government headed by Socialist leader Pedro Sanchez and including the far-left Podemos group will depend on a tight vote count. After failing, expectedly, to gain an absolute majority of votes in parliament on Sunday, Sanchez needs a simple majority on Tuesday. The 167 votes he appears to have lined up in the 350-member legislature should carry him through thanks to a pact with the Catalan Republican Left, a secessionist party in Catalonia that has agreed to abstain rather than vote “no” like other pro-independence forces from the region.
If Sanchez squeaks through, his government will be a minority one like almost three-quarters of all Spanish administrations since the monarchy’s restoration in 1975, and the 44% of votes it’ll control in parliament will be respectable by Spanish standards. In more recent years, since the dominance of Spain’s traditional center-left and center-right parties was broken, governments have had to survive with far less support.
Sanchez got to that 44% by making a deal with Podemos in November. The deal as it stands commits him to a more resolutely leftist agenda than the Socialists would have advanced alone. Among other things, it calls for the repeal of the 2012 labor market reform, which succeeded in driving down unemployment from its peak of 26.3% in February, 2013 to about 14% today. In part thanks to that reform, Spain has one of the highest shares of temporary employment in the European Union and one of the lowest rates of transition into open-ended jobs. The leftist coalition wants to strengthen worker protections by limiting companies’ ability to hire temporary workers and prioritizing industry-wide pay agreements.
The coalition also plans to hike income taxes for corporations and high earners, starting with those individuals who make 130,000 euros ($146,000) a year and capital gain taxes. A minimum wage hike to 1,200 euros a month from the current 1,050 euros is planned. The leftist parties also have committed to unlink pensions from life expectancy and the performance of the Spanish economy.
It’s far from certain that Spain has recovered enough from an especially harsh economic crisis for such an ambitious tax-and-spend program, accompanied by a boost to workers’ protections. Unemployment has flatlined in recent months at one of the highest levels in Europe. Economists whose forecasts are tracked by Bloomberg expect the Spanish economy to grow 1.7% this year, the lowest rate since 2014.
But even if this isn’t the best moment for strong leftist policies, Sanchez had little choice but to secure the support of Podemos. His failure to make a deal with the radical left last year led to an early election; without them, he might not be able to govern at all — and Spain might turn to what he terms an “apocalyptic coalition” of the center-right parties with Vox, the rising far-right group.
Eager to govern and to stave off a right-wing revival, Sanchez is taking a gamble on the kind of center and far-left alliance that, so far, only works well in neighboring Portugal, where Antonio Costa’s coalition got a new lease of life in last year’s election. If it works — that is, if Sanchez’s cabinet avoids internal wrangling and if its proposed policies don’t make things worse for ordinary Spaniards — Europe’s center-left parties will be tempted to consider similar arrangements and bolder socialist agendas. In Germany, for example, alliances between the Social Democrats and the post-Communist left work on a regional level but such a deal has yet to be tried nationally.
The other gamble Sanchez can’t avoid is on Catalonia. The deal his party has signed with the Catalan Republican Left involves creating a new compromise-seeking format between the Spanish and Catalan governments, in which the parties promise to respect and debate all proposals from each side. It doesn’t sound like much, but it’s a step away from the current confrontation in which Spain’s institutions are firmly aligned against Catalan’s separatists. Last week’s ruling by Spain’s electoral board to disqualify Catalan president Quim Torra from holding a parliamentary seat, and therefore his office, is just the most recent example
Any concessions to Catalan separatists are highly unpopular in the rest of Spain, and if Sanchez is seen compromising with them, it will boost the right. Vox’s relatively strong performance in the recent election should be a warning. Of course, the Catalan Republican Left is only tolerating Sanchez because it fears the rise of the right even more than he does. But should he fail to make any concessions at all, the Catalans will be hard-pressed to explain their acquiescence to their voters.
Sanchez’s tenure will be defined by the risks he has been forced to take. He’ll have to be more of a radical socialist and more of a Catalonia dove than he really is — and, perhaps, than is good for Spain. Even for someone as politically gifted as he is, that’s a tall order.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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