Spanish Socialists, Allies Still Talking Hours Before Key Vote

(Bloomberg) -- Spain’s Socialists were still locked in talks with their potential allies Podemos hours before a confidence vote scheduled began on Monday.

Acting Prime Minister Pedro Sanchez’s party appeared to be inching toward the country’s first ever coalition government after a breakthrough in negotiations over the weekend with Podemos. Senior figures in Sanchez’s party projected optimism over the weekend that they will finally be able to form a government nearly three months after clinching victory in a general election in April.

Sanchez is searching for support in a fragmented parliament ahead of the vote this week. He overcame a significant hurdle on Friday when his main ally-cum-rival dropped his demands for a cabinet post in return for supporting Sanchez.

Pablo Iglesias, who leads the left-wing group Podemos, said he doesn’t want to be an impediment to the formation of a progressive government, easing weeks of deadlock with Sanchez. Iglesias still wants his party to control a number of ministries in a coalition government, he said.

Even so, no agreement had been reached by late Sunday as the parties argued over how many and which ministries the Socialists were prepared to relinquish to the Podemos alliance, local media reported. The final deadline is July 25, when a second vote is scheduled if the first one fails.

Sanchez said last week that he wouldn’t allow Iglesias to be part of his government due to differences on key policy issues including how to handle the Catalan independence campaign, although he was open to allowing other Podemos members into his cabinet.

Iglesias’s concession brings Spain a step closer to forming a stable government after almost four years of political drift during which successive administrations failed to command reliable majorities.

“We’re convinced we’re going to reach an agreement,” Adriana Lastra, deputy general secretary of the Socialist party, said in comments to the media on Saturday. Negotiations should result in “a fully working government by next week.”

Sanchez’s party emerged as the winner of April’s general elections but fell well short of a majority, leaving him needing to negotiate with Podemos and other smaller groups to get through the investiture process that starts in parliament Monday.

“The Socialists say that the only stumbling block in the way of such a government is me,” Iglesias said in a video posted on Twitter. “My presence in the cabinet won’t be a problem.”

Iglesias said he wants Podemos to have a number of ministerial jobs in proportion to its share of the vote in April’s election.

The confidence vote process begins on Monday with a debate in parliament. A first ballot is scheduled for Tuesday in which the Socialists need an absolute majority of 176 votes to be confirmed. If that fails, a second vote requiring a simple majority will be held on Thursday.

Sanchez’s Socialists won twice as many votes as Podemos and its allies in the election, meaning Podemos is claiming one third of the ministerial posts. The previous Socialist administration comprised 17 ministries.

Sanchez has drawn a line on giving Podemos the foreign, interior, defense and justice ministries, El Mundo reported on Sunday. The focus of talks will probably fall on whether the Socialists are prepared to relinquish the Budget Ministry, something some of them are loath to do given that the current minister, Maria Jesus Montero, is highly regarded and has gained in influence in the government since assuming the role last year, El Mundo said.

Talks will also revolve around whether a Podemos official could be assigned a role as a senior official for social affairs, El Mundo said. The two parties are close to agreeing on a policy program - it’s the issue of how many and which ministries Podemos is assigned that will prove harder to solve, El Pais reported.

Iglesias wants at least five ministries for Podemos and to be able to name those ministers while Sanchez wants to be able to block those proposals if they’re not to his liking, according to El Pais.

Sanchez’s stance appeared to be confirmed by Deputy Prime Minister Carmen Calvo, who said that the two party leaders have spoken by phone over the weekend.

“For everything to go well we need to go bit by bit and with prudence,” Calvo said in television interview on La Sexta on Saturday night. “It’s our understanding that they need to propose some names.”

In another potential boost for Sanchez, Esquerra Republicana, a Catalan separatist party, said it may abstain in next week’s voting if the Socialists and Podemos can seal a pact. Support from Esquerra comes at a political cost, though, and Sanchez has said he doesn’t want to rely on pro-independence parties to be able to govern.

A Socialist government reliant on Podemos would likely continue the gradual process of narrowing the country’s budget deficit, while looking to direct benefits to those groups that have so far missed out on the economic recovery. Spain is the fastest growing major economy in the euro area and is set to expand by 2.3% this year, according to the European Commission.

To contact the reporter on this story: Charlie Devereux in Madrid at cdevereux3@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, ;Andrew Davis at abdavis@bloomberg.net, Sam Unsted

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