Spain’s parliament on Tuesday narrowly confirmed Socialist leader Pedro Sanchez as prime minister for another term, paving the way for the country’s first-ever coalition government since its return to democracy in the 1970s.
Sanchez, who has stayed on as a caretaker premier since inconclusive elections last year, won 167 votes in the 350-seat assembly compared to 165 against, with a decisive 18 abstentions by Catalan and Basque separatist lawmakers.
He plans to form a minority coalition government with the leftist party Podemos this time around, in what would be the first coalition government in Spain since the country returned to democracy following the death of longtime dictator Francisco Franco in 1975.
Podemos’ Pablo Iglesias broke into tears after the results of the vote were announced and his lawmakers chanted the party’s slogan, “Yes we can!”
DIRECTO | Pablo Iglesias, visiblemente emocionado tras abrazarse con Pablo Echenique #investidura https://t.co/iXJLn1fFVG pic.twitter.com/JcaevoQ1il
— EL PAÍS (@el_pais) January 7, 2020
“A period of moderation, progress, and hope opens up today,” Sanchez tweeted shortly after the vote
In an effort to rein in inequality, the new coalition government intends to raise taxes for the rich, roll back a reform of labor market laws, and raise salaries.
The budding coalition has been met with hostility by Spain’s major business lobby group, CEOE, which claimed the proposed economic program will have a “very negative” impact on job creation in the country.
Spain’s center-right parties and the far-right Vox party denounced Sanchez for agreeing to form a “radical” coalition.
The upstart far-right party surged into third place in April’s national elections as part of a broader phenomenon that has seen the far-right become ascendant globally in recent years.
Labor Market
The coalition has vowed to roll back some changes introduced by Spain’s previous conservative government in 2012 to make the labor market more “flexible” by making it easier to fire workers.
It wants to eliminate or severely restrict the reform’s more controversial measures such as the authorization to fire workers on sick leave or unilaterally change a job contract.
Former conservative Prime Minister Mariano Rajoy has said his reforms led to drop in Spain’s high unemployment rate but critics say it has caused salaries to fall and led to a rise in unstable, temporary work.
Minimum Wage Hike
Sanchez’s previous government rose the monthly minimum wage by 22 percent to 1,050 euros ($1,175).
His new coalition government wants to increase it further by the natural end of the legislature in 2024 to 60 percent of Spain’s average monthly salary which currently stands at 1,970 euros.
Pensions will also once again be linked to inflation, which has not been the case since 2014.
Taxing the Wealthy
The government wants to raise income taxes on those earning more than 130,000 euros per year, and set a minimum corporate tax rate of 15 percent, while banks and energy firms will have to pay 18 percent.
The goal is to prevent companies from using tax deductions and loopholes from paying far less than the current official corporate tax rate of 25 percent.
Spain’s largest union, CCOO, has said the government’s overall program is “positive” but criticized a “lack of ambition” regarding taxes, recalling that Spain’s tax rates are lower than the European average.
Housing Affordability
The coalition wants to give mayors of cities struggling with “abusive” rent hikes to temporarily impose rent ceilings.
Madrid and Barcelona have in recent years seen rents skyrocket, in part due to the rise in popularity of renting homes to tourists on home-sharing platforms such as Airbnb which has decreased the number of properties available for longer-term rental.
The proposal has sparked an outcry from the real estate sector which argues it would discourage investment in properties built with the goal of being rented out.
Debt Reduction
The coalition agreement between the two parties vows to “respect the mechanisms of budget discipline” without setting a specific target for the reduction of Spain’s debt, which stands at nearly 100 percent of the country’s economic output.
Last year the European Commission chided Spain for its slow pace of debt reduction.
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