On 28 April, the socialist party (PSOE) won the general election, taking 123 seats out of 350 in Congress, while the Popular Party (PP, center-right) halved its 2016 number of seats (to 66). The right-of-center landscape is now fragmented between the PP, Ciudadanos (Cs, center with 57 seats) and Vox, the far-right party entering the legislative body for the first time with 24 seats. We see no immediate financial or growth risk: Spain has shown its resilience to political uncertainty, and the winning party is pro-European. Q1 GDP growth surprised on the upside (+0.7% q/q), accelerating from +0.6% in Q4 2018, and the manufacturing PMI rose to a three-month high of 51.8 points in April, up from 50.9 in March. In the medium-term, though, political fragmentation means passing structural reforms will be tougher. Forming a government will take long and socialists have to make some concessions to regional pro-independence parties to win their support. The Spanish economic miracle may come to an end on the back of decreasing cost competitiveness and a more challenging international environment.
