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Can Spain afford the political limbo?

Thursday, August 11, 2016 - 01:42

Two inconclusive elections and the impasse in Spain is now eight months old. But, as Sonia Legg reports, the economy seems to be brushing off the uncertainly with bond yields hitting record lows.

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Another delay in what's becoming a marathon wait for a new government. Elections in Spain in June were, for a second time, inconclusive. And Mariano Rajoy - the acting and former Prime Minister - now wants another week to decide whether to back a reform plan from opposition liberals. It includes fighting corruption and is a condition of forming a new government. (SOUNDBITE) (Spanish) CIUDADANOS LEADER ALBERT RIVERA SAYING: "For the good of Spain and Spaniards I'm willing to sit down to negotiate with those who, in my opinion, don't deserve to rule the country, those who I think have not done things well, those who have not committed in recent years to the fight against corruption." Even if they eventually agree, Rajoy needs the Socialists too. It's the sort of limbo economies usually don't like - but in recent months Spain has been ticking along nicely with expected growth for 2016 not far off 3 percent. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "You can argue that an economy can operate on auto pilot if you like for a period but whether that period can extend over the longer term is debatable." Spain's no Germany - its recent positive economic surveys are from a low base. And the country still has one of the worst unemployment rates in the euro zone, but it tackled some of its problems. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "I think it is the legacy of some of those reforms that is providing some structural boost to the Spanish economy alongside a relatively competitive euro over a longer term scenario and all at the lower level of interest rates." Good timing then for Spain. But it can't rely on that for too long. And as Britain found out in the days after the Brexit vote - investors hate uncertainty.

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Can Spain afford the political limbo?

Thursday, August 11, 2016 - 01:42