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2025-10-28 18:00:11
[Spain's political turmoil fails to shake bond market confidence] ⑴ Spain's ruling coalition lost its usual support from Catalan separatist parties, leaving the government with a parliamentary deficit of 146 seats to 176, dimming the prospects for budget passage in 2026. ⑵ If the budget fails again, the 2023 budget framework will remain in place, but this will not shake bond market demand—the fiscal deficit is expected to fall to 2.5%-2.8% in 2025, well below the EU's 3% threshold. ⑶ Spain's post-pandemic economic performance continues to outperform the EU, with growth exceeding the EU average by 2 percentage points from 2022 to 2024. Although growth may slow to 2.0% in 2026, solid fundamentals provide support for the bond market. ⑷ The Senate has initiated constitutional proceedings, requiring the government to submit a budget within a month. However, the impact of political deadlock on government bond spreads is far less than similar risks in France.
