Spain Budget Push Boosted by Regional Win for Premier’s Ally

Prime Minister Pedro Sanchez’s plans to pass his first budget in Spain after more than two years in power were bolstered when a key ally won a landslide victory in a regional election.

The Basque Nationalist Party, or PNV, recorded a comfortable win, with 39% of votes in the regional election, giving it the largest group in the Basque Parliament. Sanchez’s Socialists finished third at 14%. The center-right PNV already governs the Basque region with Socialist support and Sunday’s result is likely to strengthen their alliance.

Sanchez’s last attempt to pass a budget led to the national government’s collapse and an early election. His administration is working with a spending program that has been rolled over since 2018 -- it was written by the previous, conservative government and approved shortly after Sanchez came to power.

The 48-year-old premier has said he wants a new budget approved soon and, leading a minority coalition government, he needs the support of the Basques to do it. The Spanish economy may shrink as much as 15% this year, according to the Bank of Spain.

With ties between the Basque party and the Socialists strengthened by the regional election, it should be easier for the Basques to lend Sanchez support in the national parliament in Madrid.

The Basques have said they’ll support Sanchez’s 2021 spending plans if he delivers on pledges he made to them, including an early peek at the budget for senior PNV officials and veto powers in some areas. Sanchez’s Socialists are in talks with other parties in Spain’s fragmented parliament to gather support.

While holding only six seats in the 350-member parliament, the PNV has played a king-maker role in recent years for both Sanchez and his predecessor, Mariano Rajoy. It supported Sanchez when he first became prime minister through a confidence vote in 2018 and backed him again when he sought support to form a government in January.

Home to 2.2 million people, less than 5% of Spain’s population, the Basque Country has been governed by the PNV for most of the 43 years since democracy was restored following General Francisco Franco’s rule. It relied on support from the Socialists in the previous legislature.

The opposition People’s Party retained power in a regional election Sunday in Galicia, where it has governed since 1990. The two ballots were the first real test of voters’ sentiment since the coronavirus pandemic began.

In Galicia, regional President Alberto Nunez Feijoo was running for reelection and retained the majority in the local legislature. Feijoo is a leading internal critic of Pablo Casado, the head of the People’s Party, who he says has taken the party to much to the right and has led it to be too confrontational.

Both regional elections handed strong defeats for Unidas Podemos, the junior partner in Sanchez’s coalition government. The party was wiped-out of the Galician parliament, losing all 14 seats it had won in 2016, when it came in second. In the Basque Country, anti-establishment party’s support dropped from 11 to 6 seats.

Podemos, which holds five seats in the 23-member Cabinet, had campaigned strongly in both regions, notably in Galicia, where Labor Minister Yolanda Diaz is originally from and had spent most of her political career.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.