U.S. Markets closed

Sanchez’s Spain Coalition Plans Wait on Catalan Green Light

Charles Penty and Rodrigo Orihuela
1 / 2

Spain Set for Government at Last as Separatists Back Sanchez

(Bloomberg) -- Acting Prime Minister Pedro Sanchez pledged higher taxes for banks and wealthy Spaniards as his coalition awaits the final decision of a Catalan separatist party that must give its blessing to his attempt to form a new government.

Higher taxes will hit Spaniards earning more than 130,000 euros ($146,000) a year while large companies will face a minimum corporate rate of 15%. For banks and oil companies, the tax floor rises to 18%. The leadership of Esquerra Republicana, a party pushing for Catalan independence, will meet Thursday for a final decision on whether to give Sanchez the extra support he needs to move forward.

The announcement alongside coalition partner Podemos signals Sanchez’s growing confidence that he will win the support he needs to take power for a second term in the coming days. If he succeeds, the 47-year-old Socialist will lead Spain’s first coalition government since the 1930s and may allow Spanish politics to move beyond the fragmentation that has hamstrung the legislature since 2015 when Mariano Rajoy of the conservative People’s Party lost his majority.

“Coalition governments are part of this new normality that we have to accept with intelligence and generosity,” Sanchez said at a press conference in Madrid. “This accord is an opportunity to revitalize politics.”

The investiture sessions will be called for Jan. 4, 5 and 7, El Mundo newspaper reported Tuesday.

A new Socialist-led government would also seek to roll back some of the changes enacted in 2012 that sought to make Spain’s labor market more flexible.

But with the Socialists and Podemos short of a majority on their own, Sanchez needs Esquerra’s 13 deputies to endorse his attempt to form a new government in a vote in the Spanish parliament.

“We think it’s an opportunity for the independence movement,” Esquerra Spokeswoman Marta Vilalta said in a news conference Thursday. “‘It’s vital to activate the political path.”

While the PP and the far-right group Vox have accused Sanchez of treachery for seeking support from a party that wants to break up Spain, Sanchez says the country needs a new government as soon as possible to shore up the economy and deliver the progressive policies most Spaniards want.

Sanchez’s plans received a further boost on Monday when Spain’s state lawyers recommended that Esquerra’s leader, Oriol Junqueras, be allowed to carry out his role as a lawmaker in the European Parliament.

Junqueras is serving 13 years in jail for his role in the movement’s attempts to force through a split from Spain two years ago. He was elected to the European Union’s legislature in May while in prison awaiting trial and the EU’s top court this month said that he should have been allowed to take his seat. Spain’s Supreme Court is expected to rule on how to handle the situation in early January.

Sanchez needs an absolute majority of lawmakers in the 350-seat parliament to take office at the first attempt but a simple majority will suffice at the second attempt, meaning an abstention from the 13 Esquerra deputies could see him through.

Sanchez first became prime minister in 2018 when he removed Rajoy in a confidence vote.

Key points of the coalition program:

Companies lose right to fire staff after long absences due to illnessSectoral wage agreements to take priority over firm-wide dealsMinimum wage to rise gradually to 60% of average salaryRestrictions on increases in rentsTaxes on companies with less than 1 million euros in revenue fall to 23% from 25%Capital gains tax rises 4 percentage points for those earning more than 140,000 euros

(Updates with investiture dates in fifth paragraph)

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net;Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, John Voskuhl, Ben Sills

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.