Citizens movement could reshape Spanish centre-right

Subject A profile of the Citizens movement. Significance The March 2015 Andalucia regional election saw a breakthrough for Citizens and a setback for Prime Minister Mariano Rajoy's Popular Party (PP). Of Catalan origin, Citizens is now starting to compete across Spain. An opinion poll this month showed a four-way contest, with Citizens, the new left-wing challenger Podemos and the traditional PP and Socialist Party (PSOE) within three points of each other. With a centrist appeal, Citizens has proved its ability to take votes from a range of other parties, as well as attract rebels from the small centre-right Progress and Democracy Union (UPyD). Ahead of regional elections in May and a national election expected in November, Citizens seems poised to play a significant role in the development of the centre-right. Impacts Citizens is standing in all 13 regions in May, and in at least all the provincial capitals in the simultaneous municipal polls. If it performs strongly in May, Rivera may head its lists in Catalonia's September regional election and the subsequent national election. A strong performance elsewhere in May would help Citizens become main alternative in Catalonia to Artur Mas's pro-independence alliance. Citizens' results and centrism may give it a key coalition role, first in regions such as Madrid and Valencia and then nationally. Citizens will continue to expand its organisational presence throughout Spain.

Significance In the parliamentary polls, a strong performance by the Frente Amplio (FA), a new left-wing alliance, and the election of an important contingent of newcomers to Congress, mark the start of a long-delayed generational change in Chilean politics. They also suggest that the run-off presidential ballot on December 17 will be tight. Impacts The results do not necessarily imply a shift to the left, but rather that voters are eager for new faces in politics. Polling methodologies will need to be reviewed after serious errors in forecasts, probably related to coverage of younger voters. The next government, particularly if headed by Pinera, will find managing Congress difficult.


Significance While not expected to win, it will likely overtake the Socialist Party (PSOE). This development will have serious consequences for the PSOE, which faces a dilemma over its coalition preferences and the prospect of long-term decline. Impacts A strong performance by Unidos Podemos will fuel market concerns about the eventual election of a radical anti-austerity government. The prospect of a weak government, unable to meet the targets of the EU Stability and Growth Pact, will cause international unease. Both Rajoy and PSOE leader Pedro Sanchez may be replaced by their parties after the election, adding to uncertainty.


Subject Coalition negotiations in Spain. Significance Attempts to form a government following the repeat election on June 26 remain fraught with difficulties. Although negotiations between the Popular Party (PP) and the Citizens party are under way, the Socialist Party (PSOE) has so far refused to support Prime Minister Mariano Rajoy. Assistance from both Citizens and the PSOE is essential to the success of his efforts to form a minority government. Impacts Another failure by the political parties to deliver a government outcome would prompt moves for renewal to regain public credibility. Lacking an effective political response, Rajoy will continue to use the constitutional court to punish Catalan pro-independence efforts. Regional elections in the Basque Country and Galicia on September 25 will complicate negotiations between the PP and its electoral rivals.


Significance President Olafur Ragnar Grimsson has said neither he nor his UK-Israeli wife Dorrit Moussaieff have any knowledge of such transactions, which have been publicised in the Icelandic media. Grimsson had previously denied any link to the Panama Papers leak of offshore transactions, which have involved former Prime Minister Sigmundur David Gunnlaugsson. Despite initially refusing to resign, Gunnlaugsson eventually stepped down on April 5. A new cabinet has been formed and elections will be held early in autumn. Impacts The new cabinet will most likely continue the previous government's policies, with few changes. If the Pirate Party can sustain its support, it may emerge as the strongest party in the next parliamentary election. Iceland may remove its capital controls soon, with the Central Bank saying that it will not "get better conditions" than now. A new left-wing government would be unlikely to reapply for EU membership without holding a referendum first.


Subject Italy's 2020 budget. Significance On November 4, Italy’s government presented its draft 2020 budget to parliament. While it satisfies EU fiscal rules, some tax and environmental provisions could harm the government in upcoming regional elections. Impacts Government bond fluctuations will be contained by the restart of net bond purchases at the ECB. Italia Viva leader Matteo Renzi will use the budget talks to bolster his campaign to replace Giuseppe Conte as prime minister. A snap general election would likely favour the League, which remains Italy’s most popular party.


Significance The governing Socialist Party (PSSh) under Prime Minister Edi Rama is expected to win again. This implies policy continuity by what has hitherto been a successful reformist government. However, the decision by the opposition Democratic Party (PDSh) to boycott the elections creates significant uncertainty about the process and aftermath. Impacts PDSh’s boycott of parliament is blocking the completion of judicial reforms that require approval by a two-thirds majority of deputies. A PDSh boycott of elections would constitute a failure of political institutions and halt Albania’s progress towards EU integration. Disenfranchising a large constituency would escalate the political crisis and could lead PDSh supporters to resort to violence.


Subject Prospects for India to end-2016. Significance Policymakers are counting on improved agrarian performance, cheaper credit and economic diplomacy to drive growth in coming months. On the political front, after a modest triumph in the last round of regional elections, Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) are emboldened but still politically encumbered.


Significance His parliamentary approval only succeeded thanks to abstentions by the Socialist Party (PSOE). He will now form a minority government with the weakest parliamentary support for any prime minister since competitive elections returned to Spain in 1977. Impacts Tax rises, possibly in combination with spending cuts, may trigger a revival of social tensions. In the absence of major policy initiatives, economic growth is likely to slow down in 2017. Rajoy's dependence on PSOE and Citizens collaboration to pass a budget for 2017 by end-November will give them some leverage.


Subject Prospects for the Spanish government. Significance One year before municipal, regional and European polls and two years before the next general election, parties are already in electoral mode. The liberal Citizens party has consolidated a significant lead in opinion polls while electoral preparations by Prime Minister Mariano Rajoy’s Popular Party (PP) have been set back by a scandal in its Madrid stronghold and its handling of the Catalan crisis. Impacts Approval of the budget would come at the cost of delaying further reform of the pension system. Citizens’ hostility towards nationalist parties could lead to a deeper divide between unionist forces and independence movements. Endorsement of Citizens by France's La Republique En Marche could strengthen its electoral credibility. Electoral successes for Citizens would boost the influence of liberal forces and French President Emmanuel Macron in the EU.


Significance The minority Socialist Party (PSOE) - Unidas Podemos (UP) government needed the support of several left-wing and pro-independence parties to get the budget through. Its approval makes early elections unlikely and gives the government a better chance to shape the COVID-19 economic recovery and implement some of its 2019 electoral pledges. Impacts Spain’s poor record in absorbing EU funds suggests it will struggle to make the most of the EU recovery fund. The weakening of the UK currency will hurt Spanish exports to the United Kingdom, especially with fewer UK tourists coming to Spain. Greater political stability will enable Spain to pursue a more assertive foreign policy.


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