Sanchez’s Efforts to Form Spanish Government Set to Fall Short

(Bloomberg) -- Acting Prime Minister Pedro Sanchez’s attempt to form a new Spanish government ground to a halt after he failed to convince anti-austerity party Podemos to join the Socialists in a coalition.

Sanchez told parliament on Thursday that he doesn’t have enough support to win an investiture vote without Podemos, his only viable partner. Losing the vote, which will take place this afternoon, would start the constitutional clock ticking toward possible new elections in November.

“The government would have always needed Unidas Podemos, not only for the investiture but to govern during the next four years,” Sanchez said ahead of the vote. “The agreement, however, hasn’t been possible.”

Spain has turned increasingly ungovernable with three elections in four years. The economy is continuing its recovery from the ravages of the financial crisis but the country remains in a state of deep angst over Catalan independence. Voters are restless and the two-party system appears broken in a fragmented landscape with populists to the right and left.

A victory for Sanchez would have offered the country a measure of stability after a period of upheaval. The threat of new elections adds uncertainty to an economy on track to outpace every Group of Seven country this year apart from the U.S.

Last-Minute Bid

To be sure, the two parties could still reach an agreement before the ballot. Pablo Iglesias, the head of Podemos, used his address to parliament to tell Sanchez there was still time to turn the situation around, adding that he would give up his demand for the labor ministry.

The gridlock comes at a time when Spain is vying for a bigger role in the European Union, potentially upending Italy as a power broker at the negotiating table as the bloc’s new executive takes form. In fact, Sanchez has cozied up to French President Emmanuel Macron and secured one of the biggest jobs in the European Commission: foreign policy chief.

If the talks eventually do break down, it means Sanchez is on track to fail in his bid to continue as prime minister.

In general elections in April, Sanchez’s Socialists emerged as the biggest force in parliament but well short of an overall majority. That left him with no choice but to seek the support of Podemos and other smaller parties to ensure parliamentary approval for his bid to form a government.

Over a two-month period, Sanchez can in theory continue his efforts to secure a majority and go back to parliament, if invited to do so by King Felipe VI. If he fails, the king would dissolve parliament and call new elections.

--With assistance from Macarena Munoz.

To contact the reporters on this story: Charlie Devereux in Madrid at cdevereux3@bloomberg.net;Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Richard Bravo, Chris Reiter

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