Can Sánchez hold out?
Pedro Sánchez's political dilemma boils down to the fact that in the coming days he must demonstrate the utmost executive strength to make his proposal for continuity credible, just when he finds himself at his most extreme moment of weakness. Strength to convince his allies and parliamentary supporters that the legislature has a credible, minimally solid future ahead. Weakness, with a party that has been knocked out and that attributes to him the ultimate responsibility for the election of two successive organization secretaries suspected of corruption. And weakness of a government that has had many difficulties implementing its agenda during the current legislature and is trailing behind its president. Can it hold out, by relying on its playbook, under the current circumstances?
To his credit, his partners are the first to want Sánchez not to call elections, both because of the poor results each of them expects and because of the more than likely outcome: a PP-VOX government. Is this shared interest sufficient for Sánchez to demand a commitment from them to approve, for example, a State Budget for 2026, the first of the legislature? It could be an initial test of his ability to keep the current Congress alive, which currently seems difficult.
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On the economic front, another of the first files to be addressed will be BBVA's takeover bid for Sabadell. Several of its partners, especially Sumar and Junts, expect the government to issue a harsh resolution at the end of the month that would derail it. The president of the Generalitat (Catalan government), Salvador Illa, also risks part of his credibility in this game, having bet on its failure and the continued independence of the Valles-based financial institution. But, of course, the question again is: Is Sánchez in a position to fulfill these desires and confront a large part of Spain's economic power and the pressure from Brussels to simply give the green light to the operation?
Straddling politics and economics are also the unique financing of Catalonia and the forgiveness of part of the autonomous communities' debt to the FLA. Those governed by the PP, the majority, maintain a staunch opposition, partly imposed by the president of the Community of Madrid, Isabel Díaz Ayuso, especially on the issue of debt forgiveness, and partly due to their own reservations about the new model. It seems a pipe dream to undertake this objective with the additional weakness that has arisen and with the threat of regional rebellion looming.
Pedro Sánchez with Josep Oliu at the last meeting of the Cercle d'Economia
Mané EspinosaIn terms of internal political authority, the dispute with PRISA's largest shareholder, Joseph Oughourlian, remains to be resolved. The government-backed partners had hoped to present a dubious offer by the end of the month to take control of the media divisions: El País and SER. A bid that would vanish if the executive loses the ability to inspire confidence in its continuity.
The business world yearns for Sánchez's downfall, except in Catalonia.On the external front, the big issue is the pressure from the US, NATO, and several EU partners to raise the bar on public defense spending, the 5% imperial tax decreed by Donald Trump, which Sánchez has firmly opposed until now. The government has already increased the amount allocated to this item by around €7 billion so far this year, and will therefore attend the NATO summit on the 24th and 25th of this month, spending close to 2% of GDP. But its margin practically runs out here. To what extent will Sumar and Podemos allow this spending to rise without provoking a crisis? It is also true that European and NATO partners can take note of the domestic situation and choose not to apply excessive pressure, to avoid the definitive derailment of one of the most pro-European governments.
In the area of relations with the economic world, especially the business community, the complexity is also notable. A majority of Spanish businesspeople dream of the fall of the Sánchez government, especially because of its tax policies. The economic elite yearns for a fiscal counterrevolution and hopes that a PP government, either alone or in alliance with Vox, will make their aspirations a reality.
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In Catalonia, however, this position is not shared. Fiscal discontent with Sánchez and his Finance Minister and First Vice President, María Jesús Montero, is comparable to that of the rest of Spain and directly proportional to the amount of accumulated wealth. But the political impact is measured differently.
In Barcelona, not only was there support from the outset for the normalization policy adopted by Sánchez after the July 2023 elections, which involved prioritizing an investiture pact that would include, in addition to the left-wing forces and the Basque nationalist PNV, the pro-independence Junts. They were its initial promoters.
In passing, the Catalan bosses were considering redirecting the political line of Carles Puigdemont's party toward an updated version of the old, possibilist line of Jordi Pujol's Convergència. And to achieve this, it was necessary to ensure the free return of the president installed in Waterloo, in other words, an amnesty. In both cases, they achieved their objectives. The amnesty is underway, and Junts has acted as a parliamentary bulwark against left-wing initiatives they disliked. The latest, the reduction of working hours.
After a compromise on the Budget, the first issue will be the BBVA takeover bid.The fall of the Sánchez government without achieving this objective would pose a serious threat both to political tranquility in Catalonia and to the consolidation of a right-wing nationalist force with influence in Spain. Therefore, Catalan economic forces would prefer the current situation to continue, at least until an amnesty is secured and irreversible.
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