Spanish Parliament rejects coalition bid (CNBC)

After two failed investiture votes, it is likely that Spain will be heading for new elections in June. This period of political uncertainty, which started with the municipal elections, starts to show clear signs of economic impact.

There are many studies on the effect on the economy of political uncertainty. The IMF (Aisen and Vega, 2011) and Harvard (Alesina, Sule, Roubini, Swagel, 1996) explain that political instability and constant changes of policies and administrations have a direct impact on economic growth.

The first to suffer in an environment of constant political battle is consumption, investment and hiring decisions of domestic players. That is, it is Spaniards themselves who reduce economic activity seeing every day in the media a battery of impossible magic solutions, and calls to eliminate reforms that have supported growth.

Spanish consumer confidence -ICC – fell by twelve points so far in 2016. The ICC has dropped to 95.2 points, a level not seen since December 2014.

Capital flights reached 70.2 billion euros in 2015, mostly between October and December. Even if we consider the ECB cheaper lending effect, there is a clear negative effect.

Unemployment rose in February by 2,231 people.

 

About Daniel Lacalle

Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap". Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Hedgeye, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE.

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