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The controversy surrounding the exit of former King Juan Carlos I from the country last week has generated some tensions between the ruling Socialist Workers’ Party (PSOE) and Unidas Podemos. It is highly unlikely that the frictions between the two parties will lead to the demise of the government, however, given that Podemos would be obliterated in new elections. The two meaningful signposts to watch going forward are the evolution of the pandemic and the negotiations around the 2021 draft budget, which is still expected to be unveiled in September.
Spain’s former king decided to leave the country following the intensified media coverage of corruption allegations against him. Far-left Podemos exploited the opportunity to aggressively advance its republican agenda, criticizing his exit and trying to reopen the debate about a referendum on the monarchy. Prime Minister Pedro Sanchez reacted by vigorously defending the monarchy and shutting down any potential discussion on changing Spain’s political system.
Despite the widely diverging views of both parties on the topic, it is improbable that these will translate into an insurmountable fracture within the coalition government. While both parties might continue to display their ideological differences in public, Podemos will have to continue accepting the lead of PSOE on policy issues. The continued electoral decline of Pablo Iglesias’ party means that politically speaking, Podemos has nowhere to go outside of the current coalition arrangement. Its hyperactivity regarding the monarchy can be seen as an attempt to step out of the shadow of PSOE and gain some media coverage.
Coronavirus and the budget
The two key political issues to watch going forward are still the management of new Covid-19 outbreaks and the approval of the accounts for 2021. Regarding the pandemic, cases have continued to rise in the last two weeks, with the bulk of infections being detected in the north-eastern part of the country and Madrid. Despite the recent spike, the health authorities said on 10 August that the number of cases was leveling off across the country. The recent media coverage regarding the limited contact tracing resources of some regions has also forced these governments to step up their capabilities. As previously explained, Sanchez has an incentive to continue letting the regions manage the pandemic, and impose a nationwide lockdown only as a last resort.
As for the budget, the government still hopes to present a draft bill in late September. Sanchez recently suggested that the planned tax reform would be delayed given the adverse economic situation. Brussels’ decision to continue suspending the EU’s fiscal rules next year has reduced the pressure to find extra revenues, in turn allowing the government to postpone any tax rises.
Sanchez seems to hope that the move will give him extra flexibility to negotiate the budget with the other parties, such as Ciudadanos. Given that the Catalan secessionist parties seem to be gearing up for a regional election within the next 12 months, the government is skeptical of its ability to get them on board. Without the support of the Catalans, Sanchez will have to woe Ciudadanos to ensure that next years’ accounts can be passed in parliament.