(Bloomberg) -- Spanish elections in July will likely deliver a government led by the conservative People’s Party, which would be a positive outcome for the economy, according to JPMorgan Chase & Co.
The impact of a PP government “might affect especially corporate investment, which has languished since” Socialist Prime Minister Pedro Sanchez took power in mid-2018, JP Morgan analyst Marco Protopapa said in a note to clients dated May 30. A PP government may also lead to some revision of the European Union recovery fund plans and will lead “to a material delay” of the current administration’s request to tap loans from those funds.
The analyst’s comments follow Sanchez’s surprise decision to call a snap election for July 23, following a widespread defeat in regional and local elections on May 28. A poll published by El Confidencial on Wednesday shows the PP winning 144 seats and far-right party Vox clinching 52 in the 350-member Parliament, giving them an ample combined majority to form a government.
JP Morgan’s base case scenario is for the PP to govern with outside support from Vox, though Protopapa doesn’t rule out a coalition between the two parties as a last resort.
Read more: What Sanchez’s Spain Vote Gamble Could Mean for Investors
Whether the PP governs or the Socialist Party manages to hold on to power, the analyst said Spain likely “remains largely insulated from bouts of political/policy risk linked to populism or euro-skepticism.”
--With assistance from Alonso Soto.
©2023 Bloomberg L.P.
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