Sánchez calls a snap election

On 29 May 2023, after the results of the municipal and regional elections, Prime Minister Pedro Sánchez announced the dissolution of parliament and called a general election for 23 July. It was earlier than the calendar planned for the end of the legislature.

The decision surprised by its speed and by the moment chosen: a few weeks after an electoral contest and on the eve of summer. For the business world, what matters is less the political reading than the practical consequences, because dissolving parliament alters the normal rhythm of legislative activity and the predictability of the regulatory framework. In addition, in the run-up to elections parties tend to put forward very varied economic proposals, and not all of them become law. It is therefore preferable to wait and see what is approved before basing decisions on what was promised.

What was announced

The decision to call a general election for 23 July left less than two months for campaigning and preparation, a short margin for the parties and for those who had to organise the vote. For businesses and families, that period of political uncertainty could delay decisions that depended on a new government.

An early call obliges the parties to face voters again in a short period and keeps the government in a special position while the process lasts. As always in such cases, the result depended on the voters’ decision and could not be taken as known in advance. Electoral calendars also affect administrative activity, because during the campaign and the later period of forming a government some procedures slow down and decisions on aid or tenders can be delayed.

What happens to legislative activity

A snap election freezes legislative decisions and opens uncertainty about future taxation. With parliament dissolved, pending laws stop moving forward, and a caretaker government cannot promote major new reforms until another is formed.

That affects everything that was in progress: tax measures, labour rules, changes to aid or incentives. Some initiatives may be resumed after the elections, others may be amended and others may disappear, depending on the result. In the meantime, it is not possible to know with certainty what framework will apply in the following months. For companies that depend on public tenders, grants or administrative authorisations, it is worth anticipating possible delays and avoiding payment or delivery commitments that depend on decisions that might not arrive in time.

How to act

For companies, it was a moment to wait before taking decisions that depended on regulatory changes. That does not mean stopping: decisions that do not depend on politics can go ahead, such as cost management, customer relations or cash planning.

But it is worth deferring those tied to tax or regulatory changes that are still uncertain, and keeping options open. For example, avoiding long-term commitments whose cost depends on a deduction not yet approved, or leaving room in contracts to incorporate regulatory changes. And reviewing the possible scenarios with the adviser once the result is known. A practical rule is to distinguish between reversible decisions, which can be taken now because they can be corrected, and irreversible ones, which deserve to wait until there is more information about the tax and regulatory framework. It is also a good moment to check the tax and employment deadlines in the coming months, so that a busy political agenda does not distract from the company’s ordinary obligations.

In periods of political uncertainty, flexibility is worth more than speed.

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