THE EURO ZONE
Pedro Sánchez has strengthened his grip on power, upping the Socialist PSOE's number of seats in Congreso from 84 to 123 in last Sunday's general election. It was a deserved win for the PSOE leader, who had vowed to keep far-right newcomer Vox out of government in a tightly-contested vote. Sánchez has honoured that pledge, but his days of relying on the support of other parties aren't over: the PSOE is still short of the 176 seats needed for a parliamentary majority. If Sánchez's last stint as prime minister was hampered by cross-party compromise, his next is likely to be problematic for the same reason.
All eyes now have now turned to Unidas Podemos (UP), the leftist group led by Pablo Iglesias which came in fourth place on Sunday, taking 14.3% of the vote and 42 seats in Congreso (down from 71). Iglesias' party is the natural parliamentary ally for Sánchez, but a coalition between the two would still be eleven short of a majority. As a result, it would depend on the support of Catalan and Basque parties, who would make demands that Sánchez has already shown himself unwilling to satisfy. Indeed, it was precisely his refusal to grant a legal referendum on secession in Catalonia that triggered Sunday's early election.
There would also be pragmatic differences between the two main forces in a leftist coalition, even though the PSOE and UP share a lot of common ground. Sánchez and Iglesias were able to team up last autumn to draft a progressive spending plan for this year, albeit one that never saw the light of day because of lack of support from Catalan separatist parties. Between them, they also secured an unprecedented 22% increase in Spain's minimum wage, up from €736 to €900 a month.
Sánchez and Iglesias are also both in favour of increased taxes on corporations and wealthy individuals and greater public spending. Yet there would be differences of degree between the two party leaders, with UP likely to push for even higher levels of public investment and taxation than those favoured by the PSOE. A conflict would develop between the values of a Socialist party firmly placed in the political mainstream, and a radical group that has previously tried to replace the PSOE as the strongest force on the Spanish left. Neither will want to be seen as moving too far in the other's direction.
One thing, though, will make Sánchez's life easier this time around. On Sunday, the PSOE made a historic breakthrough in the Senate, parliament's upper house, gaining an absolute majority after 25 years of dominance by the conservative Popular Party. At least if Sánchez manages to move legislation to that stage during his next term, he won't encounter further problems. The difficulties, though, will consist in getting that far.