EU on the Brink: Spanish Government Faces No Confidence Vote, Poised to Fall

MADRID (AP) — Spain’s conservative government on Thursday appeared doomed to lose a no-confidence vote in parliament, with the centre-left Socialist party poised to take power.

A Basque nationalist party’s decisive announcement that it would vote in favour of the motion spelt the almost certain end of Prime Minister Mariano Rajoy’s mandate and foretold the stunning collapse of his minority government in a parliamentary vote Friday, when it will be short of support to survive.

The impending downfall of Rajoy’s government after ruling for nearly eight years came just days after his Popular Party’s reputation was badly damaged by a court verdict that identified it as a beneficiary of a large kickbacks-for-contracts scheme.

The unexpected development injected a new element of tension into European Union politics and global financial markets, already unsettled by Italy’s struggles to install a government since a March 4 election.

Under a Spanish law that prevents a power vacuum, Socialist leader Socialist leader Pedro Sanchez — who tabled the no-confidence motion — would immediately become the new leader of the 19-country eurozone’s No. 4 economy and a prominent EU leader at a time when the bloc faces numerous challenges.

Unlike Italy’s potential new leaders, Sanchez hasn’t expressed scepticism about the EU nor the continent’s single currency, both of which are broadly popular in Spain.

In the no-confidence debate, Sanchez, 46, called on Rajoy to step down over the kickbacks scandal.

“Are you ready to step down here and now? Resign and everything will end,” Sanchez told the prime minister, who listened from his seat with an impassive face. “Mr. Rajoy, your time is up.”

Rajoy was having none of it, accusing Sanchez of a power grab.

“Everybody knows that Pedro Sanchez is never going to win the elections and this is the reason for his motion, his urgency,” Rajoy told lawmakers, reminding them that the Socialists lost two general elections under Sanchez’s leadership and warning that a Socialist government would endanger the country’s financial stability.

Sanchez promised to abide by a national budget that was recently negotiated by Rajoy. It includes substantial benefits for the Basque nationalists whose promised votes in the no-confidence debate opened the door for Sanchez to oust Rajoy.

Sanchez also vowed to open talks with separatists in the Catalan regional government over their demands for independence. That issue has dogged Spain for the past eight months.

Rajoy has been in power since December 2011, successfully steering Spain out of its worst economic crisis in decades during the eurozone debt crisis and achieving some of the strongest economic growth in Europe. Last year, gross domestic product growth reached 3.1 per cent.

Rajoy, cultivating a stern image, faced down opponents who complained that the recovery came at the expense of austerity measures, just as he has faced down Catalan secessionists.

But the strong economy wasn’t enough to keep Rajoy in La Moncloa Palace, the seat of government in Madrid, and he was undone by the corruption scandal that brought verdicts last week. National Court judges delivered hefty prison sentences to 29 business people and Popular Party members, including some elected officials, for fraud, money laundering and tax evasion, among other crimes.

The PP was fined 245,000 euros ($287,000) for benefiting from “an authentic and efficient system of institutional corruption.” More damagingly for Rajoy, the judges questioned the prime minister’s credibility when he said in court that the false accounting was unknown to him.

Sanchez appeared to have the absolute majority in the Congress of Deputies — 176 of 350 seats — required to unseat Rajoy.

But the coming months could be difficult for Sanchez to navigate, with a minority Socialist government needing to please Basque regionalists, Catalan separatists and anti-austerity parties in order to pass legislation in parliament. Rajoy had labelled that prospect as a “Frankenstein government.”