The general election of 28 April

On 28 April 2019 the PSOE won the general election, but without a sufficient majority to govern alone. A long period of negotiations thus began between the parties to determine who would form a government and with what support. Winning the election, in Spain’s parliamentary system, is a necessary condition for leading the formation of a government, but it is not enough to guarantee it. It is worth remembering that an election result turns into a government only after a parliamentary process that can last weeks or months.

The result opened a scenario familiar from Spanish politics in recent years: parliamentary fragmentation requires deals, and deals take time. For families and companies, the question is not so much who will govern as when the framework in which they must plan their decisions will become clear. Until then, it helps to know what remains stable and what is left waiting. Media attention tends to focus on names and alliances, but what matters most to the economy is when there will be a stable framework in which to decide.

Winning is not governing

In Spain’s parliamentary system, the prime minister must have the backing of a majority of Congress. When the party with the most votes does not reach one, it needs deals with other parties, and those negotiations can be long and uncertain in outcome. Each party weighs its own interests, programmes and limits before committing.

That means the outcome at the ballot box does not by itself determine the final make-up of the government. The possible alliances depend on each party’s numbers and on the political will to reach an understanding. Until a majority is settled, the scenario remains open and it is prudent not to take any outcome for granted, nor the measures each programme proposes. Deals, moreover, usually require concessions on programmes, so what is finally applied may differ from what was announced during the campaign.

What it means day to day

Until there is a government with stable support, it is hard to pass new laws, budgets or reforms. For families and companies, that usually means tax and employment rules stay as they are, but also that pending decisions are left on hold, from aid to regulatory projects that were in the pipeline. This situation does not stop the economy from functioning, but it does prevent far-reaching decisions that require a new law or budget item.

Economic activity does not stop entirely, but it does become more cautious. Some companies put off investments until they know what direction economic policy will take, and some families delay important decisions about their wealth. That caution is understandable, but it should not turn into paralysis, especially when sound decisions can be taken under today’s rules.

Planning without waiting

It is common to postpone decisions until it is clear what will happen, but wealth and business planning should not depend on the political calendar. Solid decisions can be taken under the rules in force, and it is wise to leave some room to adapt in case changes come later. Well-thought-out decisions withstand different scenarios.

An adviser can help separate what can be decided now from what is worth waiting for, and check that the plan does not depend on a specific measure that may never be approved. Reviewing the wealth structure, financing and contracts calmly is always useful, whoever governs, and leaves the family or the company better prepared for whatever comes. It also helps to remember that no political scenario completely removes the need to save, to keep debt in order and to maintain a safety margin.

It is best to decide with today’s rules and leave space for tomorrow’s.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.