Large investment banks believe that the manifest inability of political parties to reach government pacts leaves Spain in a "very vulnerable" situation in the face of external threats such as Brexit, the commercial war or the worsening of the geopolitical context. This is included in the reports sent yesterday by several of these entities to institutional clients after the King confirmed the lack of consensus to propose a candidate for investiture.

International investors no longer focus so much on the prolongation in time of a functioning Government without full executive capabilities, but on the absence of rapprochements or attunement between parties with greater parliamentary representation to agree on the structural reforms that the country needs. «Our vision is that the worrying thing is not so much the lack of government, but the fact that we still have many pending duties and we are running out of tailwind. That leaves Spain in a very vulnerable situation, ”explains Rubén Segura-Cayuela, chief economist for Europe at Bank of America Merry Linch Global Research.

Analysts are already making their first predictions about what could happen after the elections on November 10. The Swiss bank UBS believes, based on the surveys published in recent days, that the distribution balance in the Congress of Deputies will not vary much. "The Popular Party is expected to recover some votes of Vox and Citizens, while the PSOE could strengthen its leadership at the expense of Citizens and We can," says the entity. However, he adds, traditional parties would be far from achieving the necessary majority to govern and the difficulties in forming coalitions will remain. "Our baseline scenario foresees the emergence of a minority government of PSOE, with difficulty in approving the Budgets and the necessary economic reforms," ​​he concludes.

This lack of structural measures will continue to "undermine" the potential economic growth of Spain and long-term fiscal sustainability, according to UBS. Two of its short-term effects will be that the Spanish Stock Exchange will continue to trade below the European average in the coming months and the profitability of the bond will remain weighed down by political uncertainty. "Any draft reform in Spain will need the agreement of at least two political parties or more, regardless of who is in the Government, and that does not seem very likely now," they conclude in Bank of America.

In the short term, analysts rule out a negative impact on the Spanish economy due to the favorable financial conditions in Europe derived from the lax monetary policy of the European Central Bank (ECB). The Frankfurt-based body last week approved a new rate reduction and the injection of 25,000 million euros into the economy, which should keep debt financing costs low.

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