Spain’s recent snap general election has resulted in a deadlock. We look at the impact that this has had on markets in Spain. Plus, how to protect your own budget in Spain in times of political uncertainty.
After four years of left-wing rule, Spain held a general election on July 23rd. The election was called by President Pedro Sánchez following a poor result in the May local elections. As Sánchez’s party came second to their main rival, the conservative Popular Party.
However, the election has resulted in a deadlock. Sánchez’s party put up enough resistance to prevent Alberto Núñez Feijóo’s PP from forming a conservative parliamentary alliance with the hard-right Vox party. But despite Sánchez’s party doing better than predicted, he fell short of the outright majority required to take office, even with support of his existing allies.
According to the London School of Economics and Political Science, Sánchez’s government has overseen significant changes including: an increase in minimum wage and state pensions, a 30% discount on all public transport, and a reduction on VAT fuel bills. Economically, inflation fell by 2%; Spain has seen the highest growth in Europe; and unemployment has steadily fallen. Additionally, Spain also became the first country to introduce paid menstrual leave. Now, it is possible to take up to three days a month off of work when menstruation symptoms are making work challenging. However, Sánchez has dealt with pushback, particularly in reaction to a botched reform of sexual consent laws and his handlings of separatist regions.
As a consequence of this deadlock, unless new political alliances are forged, Spain could be headed for another election soon.
A look at the Spain election has impacted markets
According to Reuters, on the Monday following the election, Spanish shares took a tumble. Spain’s IBE index dropped by as much as 1.8%. IBE stands for Índice Bursátil Español, which translates to Spanish Exchange Index. Moreover, there are also fears that this election result could hamper the implementation of required economic reform across Spain.
The election took place in one of Spain’s hottest summers on record, with some parts of the country seeing highs of 40 degrees. As such, energy and climate change were high up on the political agenda. The Socialist Party were planning to shut down nuclear plants from 2027. But the PP wanted to reverse these plans, as they argue it will increase the cost of energy exponentially. In the immediate aftermath of the election, utility stocks fell, and it is uncertain what will happen to them until Spain has a clear path forward on this issue. Additionally, shares in major lenders such as Santander, BBVA, Sadabell, Caxiabank fell by 1-3%. Banks are also waiting to see what economic direction the next government will take.
Protecting your finances in Spain
Impacted by socio-economic events – like a general election – currencies fluctuate every day. In the time that it takes for you to have chosen a home to holding the keys in your hand, the price of your Spain home can drastically change. Sometimes, the price can change so much that you have to end your property purchasing plans completely. That’s why we recommend that you reach out to our partners, Smart Currency Exchange. They can offer to set up a Forward Contract for you. This enables you to lock in an exchange rate for up to twelve months. So, even as the Spanish economy undergoes significant changes as it sorts itself out politically, your budget will be protected. In addition, Smart offer a Quarterly Forecast and Daily Currency Notes, whereby they inform you both of recent events and upcoming ones that impact the exchange rate.
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