A repeat election

On 10 November 2019 Spain held its fourth general election in four years. Two days later, on 12 November, the PSOE and Unidas Podemos signed a pre-agreement for a coalition government. The speed of the announcement contrasted with the previous months of deadlock, although the road to an effective investiture still required further negotiation and the support of other groups. Each election call consumes political energy and public attention, and repetition raises doubts about the system’s ability to produce stable majorities.

For those who have spent years taking economic decisions in a context of political uncertainty, the news offered a possible way out, but not a certainty. Between a pre-agreement and a government with sufficient support lies a stretch, and the legal framework in force would keep applying in the meantime. The practical question for companies and families is how to plan in that intermediate period without freezing up or betting on scenarios not yet confirmed. That perception of instability does not automatically translate into economic damage, but it can influence the confidence of those who must decide on long-term investments.

Four elections in four years

Holding elections so often keeps legislative activity on hold and can produce political fatigue. Each call means weeks of campaigning, subsequent negotiation and interim government, during which the caretaker government has limited room to act and Parliament cannot pass new laws normally.

During these periods, major economic, tax or budget decisions are postponed, which leaves companies and families waiting to know which rules they will have in the future. The accumulation of postponements has a cost: projects that do not start, aid that does not materialise and reforms that do not advance, while the deadlines of real life keep running. The deadlines and later votes depend on negotiations between parties, and any forecast must be taken with the caution that an open process demands.

A pre-agreement, not a government

The pre-agreement signed two days after the election opened the possibility of a coalition government, but the investiture vote and the negotiation of a programme were still to come. A pre-agreement expresses a political will and sets the general lines, but it does not replace the vote in Congress nor guarantee that the support will be secured.

Until there was a government with sufficient support, the legal framework would remain the current one. It is an important practical fact: current tax, employment and commercial rules continue to apply, and decisions taken under them are valid. Any future reforms would depend on the final make-up of the government and the agreements it reached with other forces. This affects matters such as taxes, pensions, housing or employment, where expectations can generate moves of anticipation that are later not confirmed.

Planning with composure

While waiting, the reasonable course is to separate what can be decided now, under current rules, from what is better postponed until there is clarity. A decision that is good under today’s rules does not usually need to wait, whereas one that depends on a specific novelty may justify some patience or a structure that allows adaptation.

A thorough review of wealth or business, with an adviser, helps identify which decisions are sound even if the political scenario changes. That review can cover the debt structure, corporate organisation, succession planning and planned investments, and it works equally under whatever government emerges from the negotiations. If a plan proves sound under the current rules, it is likely to remain so in the face of most reasonable changes that may come.

Good decisions withstand changes in the political calendar.

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