Spain’s Socialists cabinet takes shape as 2018 budget lingers in Senate

Spain’s new Socialist government leaked key cabinet member names on Tuesday, including the foreign and budget ministers, as the former government considered torpedoing its own 2018 budget proposal in the upper house of parliament.
The Socialists replaced the People’s Party (PP) as the country’s leaders on Friday after parliament passed a no-confidence motion against Prime Minister Mariano Rajoy over a slew of corruption cases.

Rajoy said he would step down from his party’s leadership on Tuesday.

The budget proposal is likely to be the new minority government’s first substantial legislative hurdle in a lower house of parliament, where it holds just 84 of the 350 seats.

However, the long-delayed proposal is in the PP-held upper house and was passed by parliament with the help of five seats held by the Basque Nationalist Party (PNV), the same group which enabled the party’s fall from power on Friday.

Now that the PNV had broken away from the PP, the centre-right party did not have to honour the agreement, party members have suggested, especially in terms of direct concessions made to the Basques to pass the budget through the lower house.

“We could foresee much more instability, more political obstacles, than there were and more difficulties in running the country,” Rajoy said in reference to a potential block by the PP of the budget in the upper house.

If returned with amendments to the lower house, the budget will need a new vote and, in a deeply fragmented legislative house, the Socialists could be forced to renew the 2017 budget for the rest of the year.Former Andalusia councillor Maria Jesus Montero was indicated to be budget minister by a close aide to Sanchez on Tuesday and will be faced with the task of setting the public sector spending ceiling for 2019, a necessary first step for the local and regional governments to make their own budgets.

The Socialists will be keen to announce a rise in spending after years of austerity under the conservative PP but they are still bound to reduce the public deficit to a Brussels target of 2.2 percent of economic output from 3.1 percent in 2017.

The new cabinet will be officially named on Wednesday.

Sanchez’s strong pro-European credentials, and the fact that Rajoy also ran a minority government, suggest a fallout from any political ructions in one of the euro zone’s fast-growing economies is likely to be limited.

Sanchez aide Jose Luis Abalos, who Spanish media said on Tuesday would be named public works minister, also said the Socialists would name Josep Borrell as the new government’s foreign minister.

Borrell has attracted media attention because of his opposition to Catalan independence and will take the position in the midst of a deep political conflict with Madrid over Barcelona’s claim to independence from Spain.

“The reaction to the plan to appoint Borrell as foreign minister shows Sanchez is not willing to cut deals with the nationalists and will focus on what can appeal to both (market friendly) Ciudadanos and (anti-austerity) Podemos,” Antonio Barroso, an analyst at Teneo Intelligence, said.