Spain’s electoral predicament is a threat to the country’s economy, according to Moody’s Analytics.
Spain appears to be no further forward after its second election in six months produced a very similar outcome as the first. The acting government in power since December has limited powers.
If no coalition agreement is reached, and talks so far have been fruitless, a third poll may have to be called.
Alongside this key problem are mounting pressure from separatists in Catalonia and uncertainty swirling around the Brexit vote.
The economic research group says all these factors are conspiring to further reduce consumer spending as well as foreign investment, and are threatening the burgeoning economic recovery.
In a new report, the group says that internal and external political issues will cause investment to slow in the short term, “partially eclipsing the benefits of domestic structural reforms.”
The regional government of Catalonia has recently decided to set out steps toward independence. Madrid is firmly opposed to any break-away attempt.
“The UK’s decision has strengthened separatist feeling in an already politically complicated Spain,” the report noted.
It also pointed out that acting Prime Minister Rajoy of the Popular Party has not managed to convince either the Socialist Party or left-leaning Podemos to support him. The three parties differ on the issue of independence for Catalonia and on other policies, which stands in the way of them agreeing to create a left coalition.
“Thus, Spain could remain without a functioning government for longer than expected,” warns Moody’s Analytics.
