Spain’s Sanchez Fails in First Attempt to Form a New Government

(Bloomberg) -- Pedro Sanchez failed in his first attempt to form a new government on Tuesday, raising pressure on Spain’s acting prime minister to find common ground with key political partners to be able to try again in two days.

The left-wing party Podemos, which had signaled ahead of time its displeasure with the terms of a possible coalition with Sanchez’s Socialists, abstained, leaving Sanchez short of the required absolute majority. The result was 124 votes in favor, 170 against and 52 abstentions.

Sanchez now needs to patch up his relations with the group and seal other alliances ahead of a second vote on Thursday, when a simple majority will be sufficient for him to be confirmed in his role.

“Time is running out and everyone knows it,” Podemos spokeswoman Ione Belarra said after the vote. “We have taken all the steps needed to build this coalition government and up to now they haven’t moved at all.”

Spanish bonds extended their declines, with the yield on the 10-year note rising 2 basis points to 0.41%.

A breakthrough seemed possible going into the weekend after Podemos’s leader, Pablo Iglesias, bowed to Sanchez’s demand that he give up his insistence on taking a senior role in the new cabinet. However, Iglesias clashed fiercely with Sanchez during Monday’s parliamentary session, saying his party would never accept a “decorative” role in government.

Carmen Calvo, the acting deputy prime minister, said Sanchez had offered
significant posts to Podemos as part of their negotiations.

“In the Spanish government there are no decorative or minor elements,” she said, adding that talks with Podemos would continue. The Socialist offer to Podemos could include a senior minister role for Irene Montero, its parliamentary spokeswoman, as well as cabinet roles for youth and housing policies, El Periodico newspaper reported.

Sanchez will need to repair his relations with Iglesias in the 48 hours that remain before the next and final vote.

If he can, he’ll have the chance to form a stable government that can support Spain’s growth and enact social policies that he sees as necessary for healing the wounds of an economic crash at the start of the decade.

If he can’t, the clock will start ticking toward new elections in November. That would be the fourth time Spaniards go to the polls in as many years.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Richard Bravo, Andrew Blackman

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