Spain’s July elections are likely to result in a government led by the conservative Popular Party, which would be a positive outcome for the economy, according to JPMorgan. The impact of a PP government “could especially affect business investment, which has languished since Pedro Sánchez took office in mid-2018,” said Marco Protopapa, an analyst at JP Morgan, in a note to clients dated 30 of May.

The analyst’s comments follow Sánchez’s surprise decision to call early elections for July 23, after a widespread defeat in regional and local elections on May 28. JP Morgan’s base scenario is for the PP to govern with the external support of Vox, although Protopapa does not rule out a coalition between the two parties as a last resort.

Whether the PP rules or the Socialist Party manages to stay in power, the analyst has said that Spain probably “remains largely insulated from episodes of political risk linked to populism or euroscepticism.” JP Morgan’s opinion coincides with that of other analysts. A victory for the Blues could mean more business-friendly policies and measures to cut taxes, according to Lluis Orriols, a professor of political science at Madrid’s Carlos III University. “The coordinates of a PP government would tend to point to a lower fiscal pressure,” he said.

The Socialists, who in 2019 had been the list with the most votes in eight of the 12 regions that passed through one, lost the municipal elections by three points against the PP and ceded a good part of the territorial power it had until now, by losing six of the nine autonomous communities that it governed. They only managed to retain power in Asturias, Castilla-La Mancha, Extremadura and the Canary Islands. The scenario that awaited the Executive was months of political balance to finish the legislature.

Sánchez hopes to repeat the results of 2019, when a few months into his government, he also announced an electoral advance. At that time there was a great mobilization of the left that left the PP at half throttle, with 88 seats and less than 5 million votes (around 20%). Four years have passed and this week’s results point to a very different reality. The PP is stronger than ever and Vox has established itself as a necessary political force to govern. Unidas Podemos, which had been a key player in forming a government, risks suffering the same fate as Ciudadanos, which has decided not to stand in the general elections

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