Acting Spanish Prime Minister Pedro Sánchez. Picture: BLOOMBERG/ANGEL NAVARRETE
Acting Spanish Prime Minister Pedro Sánchez. Picture: BLOOMBERG/ANGEL NAVARRETE

Madrid — Spain’s acting prime minister Pedro Sánchez signed a coalition with the anti-establishment party Podemos on Tuesday as he seeks to end months of political gridlock in the eurozone’s fourth-biggest economy.

Sánchez is trying to salvage the prospects of a progressive government in Spain after his electoral gamble backfired in Sunday’s election. He’ll still need to bolt on additional support before he can take office for a second term.

“The government needs to start moving as soon as possible,” Sánchez said at briefing ceremony in the parliament in Madrid with Podemos leader Pablo Iglesias. “There was no justification for continuing the gridlock.”

After four elections in as many years, the agreement draws a line under months of squabbling between the two leaders, whose failure to agree on a coalition over the summer tipped the country into new elections. Spanish stocks tumbled.

The benchmark index, the Ibex 35, erased earlier gains of 0.5% to trade 0.2% lower at 3.12pm in Madrid, making it the worst performing market in Europe.

The agreement marks a humbling climb down for Sánchez who chose a repeat election rather than form an alliance with Podemos in the summer and two months ago said he wouldn’t sleep at night if the party was part of his administration. In Sunday’s ballot, Sánchez’s Socialist Workers’ Party slipped to 120 seats from 123 as the far-right group Vox saw a surge in support.

“It seems the rise of the extreme right has made it easier for the left to come to an understanding quickly,” said Alex Quiroga, a lecturer on Spanish political history at Newcastle University in England. “Of course, some people will say this is a decision they could have easily taken in May or June.”

Still seeking votes

The Socialist-Podemos pact won’t guarantee the formation of a government by itself. With a combined 155 seats in parliament, they will still need the support of smaller or regional parties to form an administration. An absolute parliamentary majority requires 176 votes. Sánchez said he’ll start talks immediately to secure the additional support he needs.

“I’m satisfied to announce that we have reached a pre-agreement to form a progressive government in Spain, a government that combines the experience of the Socialists and the courage of Unidas Podemos,” Iglesias said after signing the agreement. “Pedro Sánchez knows he can count on our loyalty.”

The two parties agreed to focus the coalition on 10 points, ranging from the fight against corruption and climate change to control of spending. The agreement also addresses the Catalan political crisis, stating that the coalition will seek “the normalisation of political life” in Catalonia. The parties said details of the agreement will be made public in the next few weeks.

Catalonia had been a key friction point in the parties’ previous attempt to form a coalition over the summer. At the time, Sánchez said he couldn’t trust that Podemos would support his policies on the region.

Más País, a group that split off from Podemos and won three seats in Sunday’s election, will support the coalition, party leader Íñigo Errejón said in a tweet.

With Jeannette Neumann and Macarena Munoz

Bloomberg