(Bloomberg) -- Caretaker Prime Minister Mariano Rajoy may have a chance to end Spain’s nine-month political impasse and avoid an unprecedented third election after regional ballots in the north of the country next week clarify the state of play.
Since Rajoy lost a second confidence vote on Sept. 2, Spanish politicians have been back in campaign mode, fighting their own corners ahead of ballots in the Basque region and Galicia on Sunday. Once those votes are counted, they might be ready to cut a deal.
The Basque Nationalist Party is likely to be in the hot seat. They have five lawmakers in the national legislature and are on track to win the most votes in their regional ballot but polls suggest they may need help from Rajoy’s People’s Party to govern. That would open up the possibility of deal to help keep Rajoy in power in exchange for support in the Basque assembly. The Basques could, in theory, take Rajoy to exactly half the votes in the 350-seat legislature, leaving him just one abstention short of victory.
“The Basque and Galician elections could give Rajoy a chance,” said Antonio Barroso, a London-base political analyst at Teneo Intelligence. “The Basque Nationalists could in the end drop the opposition to Rajoy they’ve maintained during the campaign, while a bad result for the Socialists in both regions could trigger a revolt within the party and change their stance toward Rajoy.”
Spanish politicians have been struggling to forge a new administration since Rajoy lost his majority in December. Discontent at the economic crisis and a wave of corruption turned many voters toward new parties -- the anti-establishment group Podemos and the liberals of Ciudadanos -- and with nationalist groups like the Basques and Catalans holding onto another handful of seats, no one has been able to form a majority, even after a repeat vote on June 26.
After twice posting the worst result in his party’s history, Socialist leader Pedro Sanchez is under pressure from party grandees to give Rajoy the abstentions he needs to take office, though he’s still sounding out potential allies to form a rival majority. If neither side can win a confidence vote before the end of October, Spain will be heading to the polls for the third time in a year, most likely in December.
To be sure, bolting the Basque Nationalists onto Rajoy’s existing alliance would not be straightforward. Aitor Esteban, head of the Basque delegation in the Spanish parliament, has ruled out a deal and Ciudadanos, who backed Rajoy this month alongside one deputy from the Canary Islands, are uncomfortable with any regional groups seeking more autonomy from Madrid. And one Basque Nationalist grandee suggest a compromise can be reached.
“We are a pragmatic party,” Inaki Anasagasti, a Basque Nationalist lawmaker for three decades through 2015, said in an interview. “There are a lot things we need to negotiate with Madrid. So far we haven’t heard anything, but we are in standby mode.”
Basques Cutting Deals
The Basque region on the Atlantic coast is the country’s second wealthiest region with gross domestic product per capita 30 percent above the national average and unemployment of just 12.5 percent, compared with 20 percent nationwide. The Nationalists have ruled their region for most of the four decades since the death of General Francisco Franco, while often cutting deals with the central government to win greater autonomy than other parts of Spain.
The pro-business Nationalists are on track to win about 28 seats in the 75-seat regional chamber compared with about 16 seats for left-wing separatists of Bildu and 15 for Podemos, according to recent polling. The Socialists may end up with nine seats and the PP eight, meaning the Nationalists’ current alliance with the Socialists wouldn’t have the votes to pass a budget.
“The PP would be able to make life easy for the Basque Nationalists -- in exchange for some kind of support in Madrid,” Francisco Llera, a political science professor at the University of the Basque Country, said.