The early call for elections could help to unlock the political situation and facilitate the approval of new budgets, according to Martin Wolburg, senior economist at Generali Investments, with a centre-right government currently seen as the most likely scenario by the markets.
At this moment, is the call for early elections a positive or negative event for Spain?
Overall, it is moderately positive. The current Parliament had practically ceased to function. The Government had not approved new budgets since 2023 and had to negotiate legislation vote by vote. Bringing the elections forward a few months from the summer of 2027 has a low cost and offers an opportunity to end the institutional blockage.
The markets reacted calmly. However, some political risk premium had already been priced in. The spread between the 10-year Spanish bond and the German Bund widened by around 16 basis points last week, reaching around 65 basis points, close to its highest level in the last twelve months.
Could the elections help resolve the uncertainty in Spain, given that the Government has not managed to approve budgets in recent years nor push through key legislation, including the housing measures rejected last week?
The elections could be helpful, but only if voters grant a clear majority. Current polls suggest that PP and Vox would secure a comfortable majority above the 176 seats needed. A government with a majority could approve the first new General State Budgets since 2023.
However, recent experience shows that fragmented parliaments generate political uncertainty and slow down fiscal consolidation. The main risk is a new institutional blockage, not the expansionary measures prior to the elections.
Moreover, the housing issue will not be automatically resolved with the elections, regardless of who wins. The two housing decrees proposed by Sánchez's Government failed because Junts aligned with PP and Vox, and voters still do not show clear confidence in any party to manage this issue.
What coalition is most likely to emerge after 29 November: a left-wing coalition (PSOE, Podemos, and others) or a right-wing coalition (PP and Vox)? Which of the two outcomes would investors feel more comfortable with?
A centre-right government is clearly the base scenario. Poll averages place PP around 33%, PSOE around 26%, and Vox close to 18%. However, Sánchez should not be discounted: he managed to recover in the elections of 2019 and 2023. If the left can present itself united, especially Sumar and Podemos, it would also secure more seats, as the Spanish electoral system penalises parties that divide their vote.
Investors would likely feel more comfortable with a PP-led government that had an operational majority. The main reason is that it would have more capacity to approve budgets and implement business-friendly policies.
A PP-Vox coalition would likely involve tax cuts and stricter controls on immigration, although it is unlikely to fundamentally alter Spain's economic outlook. The greater Vox's influence on policymaking, the greater the risks, especially regarding immigration. Migration flows have significantly contributed to Spain's economic growth since 2022.
Additionally, tax cuts without compensatory measures could slow down the fiscal consolidation process.
What are the two or three main challenges facing Spain currently?
Housing affordability. Average rents have nearly doubled over the last decade, and housing asking prices have increased by around 90%. Housing is currently the main concern for Spaniards, according to CIS surveys (37.5%).
Governance and public finances. Public debt was still at 100.8% of GDP at the end of 2025. The deficit has been kept contained partly because spending has remained frozen at 2023 levels in the absence of new budgets. This is not a sustainable fiscal framework in the long term.
Maintaining growth when the cyclical tailwinds disappear. The contribution of tourism is beginning to moderate, and the unemployment rate remains the highest in the eurozone. Furthermore, inflation above the eurozone average is gradually eroding Spain's competitiveness.
Is there any other aspect you consider useful to highlight?
The fundamentals of the Spanish economy remain solid. Spain grew by 2.8% in 2025, double that of the eurozone, and is expected to maintain growth above that of the region in 2026. Additionally, the three major rating agencies upgraded Spain's credit rating in 2025 and have kept it unchanged since then (S&P: A+, Moody's: A3, and Fitch: A).
Politics has rarely significantly harmed the Spanish economy. Repeated elections and minority governments since 2015 have not prevented Spain from achieving better economic performance than many of its European partners.
Aspects to consider: the role Vox may play in a potential government, the speed of the investiture vote, and whether the 2027 budgets are ultimately approved. S&P explicitly points out the budgetary deterioration in a context of political fragmentation as a potential credit rating downgrade factor.
The European dimension. A change of government would mean the end of the last major socialist government in the European Union and one of Donald Trump's main critics within Europe.
