THE EURO ZONE
Political uncertainty continues to reign supreme in Spain, but the economic effects have so far been minimal to non-existent. In fact, so unconcerned is the Bank of Spain about the current - and very familiar - governmental vacuum that it's raised its growth forecast for this year, from the 2.2% it predicted in March to a slightly-more-rosy 2.4%. In announcing the increase earlier this month, the Bank's Head of Research, Óscar Arce, said that there were still potential risks to Spain's GDP expansion over the next couple of years, such as Brexit and uncertainty about the Chinese economy. The fact that the country is currently without a government, on the other hand, was barely worth a mention.
It's fortunate that Spain's GDP seems able to take care of itself, as there is no end in sight to the current political deadlock: the first investiture vote for Pedro Sánchez as the next prime minister is unlikely to take place before mid-July. To win that vote, the acting premier needs an absolute majority of 176 - but Unidas Podemos leader Pablo Iglesias, dissatisfied with his ongoing negotiations with Sánchez, hinted this week that that's unlikely to happen. If Sánchez does lose the first round, everything grinds to a halt for the summer break and a second vote will be held in September, where only a simple majority (more votes for than against) is required for victory.
Meanwhile, Spain's economy will continue to expand as normal and, as is always the case over the summer months, employment levels will rise due to a spike in seasonal work, mainly in the hospitality sector. That doesn't mean, though, that the country's troublesome unemployment level is falling in a sustainable manner. Tackling that problem will be one of the most pressing tasks for the next government, whenever it eventually arrives (and there might well be another general election before it does).
The Bank of Spain has also recently expressed concerns about employment levels, but for an entirely different reason. Its researchers have predicted that Sánchez's 22% hike in the minimum wage, announced this January, could result in the loss of 125,000 jobs. That would rather defeat the point of introducing the raise in the first place, but it's best not to take this gloomy forecast too seriously. Admitting that it's far from a definitive statistic, Arce said earlier this month that "we don't have a crystal ball".
You don't need a crystal ball or telepathic powers, though, to predict that political confusion is likely to characterise the rest of this year in Spain, just as it did in 2016 after the inconclusive general election of December 2015. In the meantime, the economy continues to expand at a consistently impressive pace despite the absence of its supposed stewards. It's business as usual, in other words.