Feijóo’s investiture fails

On 27 and 29 September 2023 Congress rejected the investiture of Alberto Núñez Feijóo as prime minister. As he did not gather enough support, the turn passed to Pedro Sánchez, and Spain remained under a caretaker government.

The outcome of the two votes did not surprise those following the parliamentary arithmetic, but it confirmed that the uncertainty was going to be prolonged. For companies, what mattered was less who ended up governing than how long the interim situation lasted and the decisions left in suspense in the meantime. In a parliamentary system, the arithmetic matters more than the narrative: without the necessary support in Congress, no candidate can be invested, and negotiations between groups can take longer than many expected.

What happened in Congress

After the two votes the rejection was confirmed and another phase of the process opened, with a new candidate, while the government continued in a caretaker capacity.

The investiture procedure requires the proposed candidate to win the confidence of the chamber. If not, a new turn opens with another candidate, and if the deadlines run out without agreement, fresh elections are called. Each phase has its own timetable, which explains why the situation could last for weeks. The timetable of deadlines set by the Constitution also imposes a limit on the length of the process, so the situation cannot go on indefinitely: if there is no agreement, the system provides for a new call to the polls.

What a caretaker government means

With a caretaker government, there was no new budget and no major reforms. Its capacity to act is limited to ordinary management: it cannot push through significant laws or tackle important tax changes. Any decision that depended on a new legal framework was therefore put off.

This has practical consequences. Pending bills do not advance, aid that needs renewal may be left up in the air and companies waiting for a regulatory change do not know when it will come. It is a legitimate situation foreseen by the system, but one that introduces a degree of uncertainty into planning. A caretaker government keeps paying public salaries and providing essential services, but it cannot send bills to parliament or approve new budgets, so those of the previous year remain in force. For those awaiting a specific reform, an aid scheme or an administrative decision that requires a new legal framework, this situation means waiting, and waiting has a cost worth calculating rather than ignoring.

Planning without knowing

Companies were operating under the 2023 rules without knowing what the 2024 ones would be. That affects hiring, investment and pricing decisions that depend on deductions, aid or rates that could change.

One possible response is to prepare several scenarios, agree long-term contracts flexibly and not rush irreversible decisions until there is more clarity. For example, calculate what would happen to the company’s results if the current framework is maintained and what would happen if an aid or deduction is withdrawn, and decide in advance what would be done in each case. A simple method is to divide decisions into three groups: those that can be taken now, those that will be taken when there is clarity and those that depend on factors unrelated to politics. Each group requires different treatment. For treasury, it is worth keeping a somewhat larger liquidity margin while the uncertainty lasts, so that a delay in aid, public payments or administrative decisions does not strain the business’s ordinary accounts.

Uncertainty is better managed with scenarios than with assumptions.

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