Global Daily – Spain’s last chance for a left-wing government

by: Aline Schuiling , Maritza Cabezas

In this publication: Spain’s Podemos party is holding a referendum about joining a left-wing coalition. A ‘no’ will likely result in new elections by the end of June. Modest inflation pressure in the US…Fed to remain cautious, until inflation picks up with a steady pace.

 

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Spain’s Podemos holds referendum on whether to join a left-wing government

In a last attempt to form a new left-wing government after the 21 December 2015 general election, Spain’s left-wing anti-austerity Podemos party will hold a referendum on 14-16 April. The results are expected to be published on Monday 18 April. The members of Podemos will vote on whether the party should join a coalition of the centre-left PSOE and the centrist Ciudadanos, which would have a total of 199 of the 350 seats in Parliament. Meanwhile, the leaders of PSOE, Ciudadanos and Podemos failed to reach agreement last week and Podemos leader Pablo Iglesias is against a coalition that would include the centrist Ciudadanos. Therefore, the chance of a ‘no’ vote by the Podemos party seems very high. That said, even in the unlikely event of a ‘yes’ the coalition would probably be very unstable, as there is a broad range of ideological differences between the three parties involved and the policy plans seem irreconcilable.

 

New elections very likely

In the likely event of a ‘no’ result in the Podemos referendum, a new general election seems very likely. Following the fragmented results of the December elections, several attempts to form either a centre-right or centre-left government have failed. In theory, all parties still have until 2 May to form a government, but all options seem to have been explored without success. Implying that any last-minute deal would probably result in a very unstable government. In case new elections will be held, 26 June is a likely date. Meanwhile, polls show that the results of new elections might not differ dramatically from the December results, meaning that the political landscape would remain fragmented.

15 Apr

 

Modest inflation pressure in the US…

US consumer prices rose by a modest 0.1% mom in March, after a decline of 0.2% the previous month. This was mainly the result of rising oil prices. Meanwhile core inflation rose by 0.1% a slowdown from 0.3% in February. Prices of medical care increased at a slower pace than the previous month. As for, shelter costs, which have been supporting the rise in core inflation these edged down, but remain firm. On a year on year basis, US consumer prices edged down to 0.9% in March from 1% the previous month. Core inflation ex food and energy slowed to 2.2% from 2.3% in the previous month.

 

…Fed to remain cautious until inflation picks up with a steady pace

The view on inflation of Fed officials is still divided. In the most recent FOMC minutes, some Fed members mentioned that they are seeing a firmer trend in inflation building up, while others including the Chair of the Fed, think that the increase is unlikely to be sustained, since it is related to increases in prices that were volatile in the past, including medical costs, while inflation pressures from abroad are also subdued. On top of this, wage pressures are limited. All this means that the Fed is not under pressure to raise interest rates.