The Madrid Stock Exchange is today the worst in Europe with a mid-morning drop of around 0.6%. At the beginning, the decline was around 1.2%. The Spanish Bonos show no particular reactions to the expected victory of the people in the political elections which, however, did not give a clear majority to the sides in the field. The 10-year Bonos benchmark (31/10/2033) yields 3.45% with a spread over the Bund of 101 basis points.
The market acknowledges that the first result of yesterday’s vote is a less governable Spain. Of all the scenarios this was certainly the least desirable because it is in the history of Spain the clear contrast that in the past has already led to a bloody civil war. This result – the analysts explain – is positive news for Italy for more than one reason. The elections of 25 September and the subsequent ones at the administrative level expressed a clear majority in favor of the centre-right coalition: from today in the eyes of investors and financial markets, Italy is more “reliable” than Spain, and in a “zero sum” game this is a significant advantage that must be preserved over time.
The PP and Alberto Fejio have shown moments of uncertainty: they will need the support of the Italian centre-right government even more, and certainly the rising star of Spanish politics is Isabel Diaz Ayuso. It is no coincidence that Pedro Sanchez brought forward the elections to prevent Isabel Diaz Ayuso from becoming the natural candidate of the PP in place of Alberto Fejio at the natural expiry of the legislature next December.
To be named “President”, Pedro Sanchez will need the vote of the “independentists”, and the markets are well aware that Catalan, Basque and Andalusian independentism is by no means a joke or a living room conversation topic
Overall a negative result for Spain and the Spanish economy, but for this reason partly positive for Italy which will have the opportunity to recover at a competitive level against a country that in these 20 years had made giant strides precisely on the infrastructure issue. It is on this front that we must insist, because it is time to relaunch and redefine Italy’s positioning in the eyes of investors and the markets. Will Elon Musk still want to install his own Giga-Factory in Spain if a politically stable framework does not emerge?