Podemos are walking along the precedent of Sweden and Portugal to establish a coalition with the Socialists (PSOE).
That is significant because while the centre-right has the experience of Liberals (Ciudadanos) and the centre-right (EPP) governing in coalition, there is no precedent of a governing coalition of the left. The agreement between Podemos and PSOE reinstates the centre-left versus centre-right dimension in Spanish politics.
Last week, the leader of Podemos Pablo Inglesias called himself a “partner in government,” El Pais reports. That is one step further than mere support in parliament for the minority Socialist Government of Pedro Sánchez.
The Sanchez government will face its first test in trying to pass the 2019 budget by October 15. PSOE holds 84 seats in Spain’s 350 seat parliament. That means the Socialists are reliant on Podemos’ 67 seats.
The government also relies on Basque and Catalan nationalist parties, which makes the coalition inherently unstable. On the one hand, Podemos favour a Catalan referendum on independence while the Socialists oppose it. On the other, the Socialists rely on Catalan support and cannot afford to alienate them altogether.
Since June, this partnership has run smoothly
Last week, the two main partners were able to sign off a 20-point “roadmap” that paves the way for left-wing consent on the 2019 budget.
The left-wing budget is distinct from that of the Conservative government of Mariano Rajoy. Sanchez and Inglesias want to lower VAT on essential goods, income tax on the self-employed, regulate the rental market, and increase investment in education. There is also talk of a windfall tax on the banking sector, Bloomberg reports.
These objectives are made easier by increased revenue, as Spain is the fastest growing economy in the Eurozone. Still, there is a cost. Sanchez has notified Brussels that his government will miss the 2.2% deficit target set for 2019; his government now aims for 2.7%.