- Yesterday’s regional election in Andalusia marked an unexpected setback for PM Sánchez as the Socialists (PSOE) are set to lose the control of the region after 36 years.
- The centrist Ciudadanos (C’s) and the center-right People’s Party (PP) could reach an agreement with the right-wing Vox, whose votes skyrocketed from 0.2% to 11.0%.
- The Andalusian vote further weakens PM Sánchez, who already has so far failed to secure the needed support to pass the 2019 budget.
- However, it also makes a snap election in 2019 less likely. Facing the risk of moving to the opposition, PM Sánchez could try to extend his mandate until 2020. The Catalan regional parties could help him remain in charge by softening their critiques, as a new government with Vox would adopt a harsher stance on Catalan separatism.
- The reaction on Spanish Bonos this morning was muted. Investors are likely balancing the fading risk of a national snap election in 2019 with the risks posed by a future larger role of this rightwing party in Spanish politics.