Spain’s Congress Confirms Sánchez As PM: Which Is The Economic Pledge Of The New Leftist Coalition?


Pedro Sánchez has narrowly passed the confidence vote in Spanish Congress this Tuesday and will become prime minister after nine months of a caretaker government.

The Socialist leader (PSOE) has succeeded the investiture thanks to the votes in favor of its coalition ally Unidas Podemos and other smaller regional groups such as the Basque Nationalist Party (PNV) and the Galician Nationalist Bloc (BNG).

The pro-independence Catalan Republican Left (ERC) and the left-wing Basque nationalist EH Bildu helped Sánchez with their abstention while the main right-wing parties –People’s Party (PP), Vox, and Ciudadanos– voted against.

The victory came in the second voting round in Parliament, at which the candidate to the presidency only needs more ‘yes’ than ‘no’ to be elected. Sánchez failed the first round that was held last Sunday when an absolute majority was required.

The close result of 167 votes in favor versus 165 votes against and 18 abstentions reveals a complex mandate that will be marked by the clash between the reform ambitions of the coalition partners and the need of external support to pull them through.

Political tensions are rising

The escalation of tension between the left, right, and nationalist blocks that intensified during the electoral campaign has only increased ahead of the new mandate.

The opposition has maintained a very aggressive tone throughout the investiture, calling the Sánchez an ally of the “coup perpetrators” and ” terrorists ” in reference to the Catalan and Basque parties that made the government possible.

The PSOE’s agreement with ERC to get the party’s abstention in exchange to stablish bilateral negotiations between Spain’s central government and the Catalan Executive on the political situation of the region has triggered the anger of the right-wing and other small groups.

During the debate, Sánchez was accused by the opposition of forming an unconstitutional government that would “break Spain’s unity”.

“Spain is not going to break, the Constitution is not going to break,” Sánchez responded. “What is going to be broken is the blockade to the progressive Government democratically elected by the Spaniards”.

Some deputies supporting the socialist leader have denounced strong pressures to change their ‘yes’ for a ‘no’ in order to prevent the coalition from succeeding.

The new Executive aims to carry out deep social and economic reforms. But this task will not be easy considering the parliament’s fragmentation and the minority government despite the coalition with Podemos.

New government’s economic pledge

The PSOE-Podemos governing program focus to a large extent in “tax justice measures”. In this regard, the coalition partners have agreed to raise taxes to high incomes and large companies while lowering them for SMEs.

The rates of the Personal Income Tax will be increased by two points for taxpayers with income over €130,000 ($145,000) and by four points for the part exceeding €300,000 ($334,400).

In addition, the State Taxes on Capital Gains will be increased by 4 percentage points for incomes over €140,000 ($156,000).

The program foresees a reform of the Corporate tax as well to guarantee a minimum taxation of 15% of large companies, which would be extended to 18% for financial institutions and hydrocarbon companies.

SMEs of a turnover below one million euros ($1,11 million) will benefit from a tax reduction from 25% to 23%.

The labor reform approved by the conservative People’s Party (PP) during the economic crisis will not be entirely repealed as requested by Podemos. However, the coalition partners have agreed to overturn some of the “the most harmful parts” of the law.

This would remove the possibility of dismissing due to absenteeism caused by sick leave and put an end to the priority of the application of companies’ collective agreements over the sectoral ones.

The PSOE and Podemos have also planned to raise the minimum wage to progressively reach 60% of the average salary in Spain, although they do not specify within what time frame.

Regarding housing politics, the text indicates that “the necessary regulatory measures will be promoted to put a ceiling on abusive increases in rental prices in certain areas of stressed market.”

To achieve any of these reforms it becomes essential for Sánchez to pass the 2020 General State Budget, which is linked to the tax regulation and other major law amendments.

Last year, the Congress’ rejection of the PSOE’s General Budget forced Sánchez to call elections. The approval of the new government’s 2020 budget will be the first and main challenge of the leftist coalition to ensure stable governance for the next four years.

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