Spain is the latest European country to have a new coalition government after a period of political stalemate and uncertainty and the left-wing government will aim to focus on growth policies and addressing inequalities, the country’s vice president told CNBC.
“I’m extremely happy that we finally have a government, it took quite some time, it was not an easy time but we finally have a coalition government in Spain,” Nadia Calviño, one of four vice presidents in Spain, told CNBC’s “Squawk Box Europe” Wednesday.
“We are very clear about a continuity message. In the past 19 months, we have followed a policy based on three lines: fiscal responsibility, social sensitivity and structural reforms and these will be the three main guiding lines for us also in the coming years,” she said.
The coalition is made up of Prime Minister Pedro Sanchez’s party, the Spanish Socialist Workers’ Party (PSOE) and Unidas Podemos, a group of left-leaning parties led by Pablo Iglesias, who is known for his anti-austerity stance.
The joint government came about after Sanchez won snap elections in April and November 2019, but fell short of a majority and struggled to form a government. The inconclusive vote last fall led to the formation of this current minority coalition government, however, and it very narrowly won a parliamentary vote earlier this month.
As a minority coalition, the government will likely have to rely on smaller regional parties to pass laws. However, this could lead to political instability in Spain’s already fragmented political system.
Still, Sanchez and Iglesias (who is also a vice president) have some shared goals including plans to roll back some 2012 labor reforms under the previous Conservative government that supporters said make Spain more competitive, but whose critics say make many jobs more precarious. They have also signaled that they could increase taxes on higher earners and companies.
Speaking to CNBC at the World Economic Forum in Davos, Calviño recognized that a coalition government meant striking a balance between the different party approaches but said “the basic lines are common, are shared.”
“What we have signed with Podemos is a governing agreement which is very clear about striking the right balance of continuing growth, pursuing entrepreneurship, pursuing those reforms that we have been launching in the last few months and, at the same time, having a deep focus on addressing inequalities,” she said.
The European Commission forecast in November that Spain’s gross domestic product would expand 1.5% in 2020 and 1.4% in 2021, moderating a more robust trend seen in recent years. By comparison, the country’s GDP growth was 2.4% in 2018 and 1.9% in 2019.
There has been pressure on economies like Germany, seen as the euro zone’s growth driver and one which runs a large budget surplus, to spend more money in order to stimulate the wider sluggish European economy. But Calviño said every country has to look at its own policies to boost growth.
“Spain has been registering very strong growth for the past five years,” Calviño said. “We closed down last year in a slowdown environment, still at around 2% year-on-year growth, so Spain is one of the four larger economies (in the EU) and we need to play our part to be one of the motors for growth,” she said.
“I don’t think we should focus just on one country doing that job, we all have to undertake our reforms and ensure that we have solid sustainable growth in the mid-run.”