Spain elections results: Investors want actions, not promises
Spanish investors hope the incoming government will set to work quickly and announce what measures it will implement to help resolve the country’s economic and financial crisis.
“The time now is for action, not speeches, both at the Spanish and European levels” said Angel Martinez-Aldama, director general of Inverco, Spain’s asset management and pensions funds association.
Mariano Rajoy’s right of centre Partido Popular (PP) won Sunday’s general elections with an absolute majority with 186 seats in the 350-seat parliament, which will allow it to push through a programme of fiscal, economic and labour market reforms.
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The new government will only take office once it has been approved by the parliament on December 22, though analysts and market participants hope Rajoy will detail some of his policies and announce the names of key ministers in his government team before that.
The markets are not interested in promises but expects the new government to take some practical measures to deal with the crisis, said Félix González, director of Capitalia Familiar an independent Spanish investment boutique, in a radio interview with Negocios.
The government should implement measures as soon as possible. “The market needs facts not hopes. We are facing difficult times and the risk premium [paid on Spanish sovereign debt] remains unsustainable in the medium term,” González said.
Underlining the urgency, Spain’s borrowing costs rose to record levels last week and the country risks following in the footsteps of Greece, Portugal and Ireland as the next victim of the eurozone’s debt crisis.
By mid-Monday morning, Spain’s 10-year bond yield rose to 6.566% in Madrid from 6.379% on Friday. The gap between Spanish and German borrowing costs initially fell by a few points early in the day but rose again to 470 points. The Ibex index was down 1.9%.
The PP’s victory which had been expected, is unlikely in itself to change the mood in the markets which continue to be affected by the lack of a resolution in the eurozone crisis as well as by domestic concerns, said analysts. Rajoy is already under pressure to give more details of his policies to overcome the crisis which has seen growth stagnate and pushed unemployment to more than five million or 23% of the workforce.
Many asset managers are taking a wait and see attitude. Local business sentiment will depend on how quickly the new government puts into action its programme of reforms. In the meantime, the country’s sovereign debt risk premium will be tested again on Tuesday with another treasury auction.