How Brexit affected Spain's election

With markets in free fall after Britain's vote to leave the European Union, Spanish voters turned away from anti-establishment parties Sunday and endorsed the perceived safety and security of ruling conservatives. 

Europe has been watching Spain to see how anger at the status quo might play out in another EU country after “Brexit.” In recent weeks, a left-wing anti-establishment alliance called Unidos Podemos (Together We Can) had surged in opinion polls to become the No. 2 force in Spanish politics, behind the conservatives. Its slogan is 'Sí se puede' — Yes we can. 

But election results early Monday showed they couldn't. Unidos Podemos placed third, behind the two establishment parties, the Partido Popular, or Popular Party, and the Socialists. 

Though the conservative Popular Party won 33% of the vote and the most seats in parliament, it fell short of a majority, and coalition building will likely take months. It needs to woo other parties to govern with it, but already by late Monday, the two most natural contenders, the center-right Ciudadanos, or Citizens, and the Socialists, both ruled out such support. Tricky negotiations will follow, and the Popular Party could be forced to replace Rajoy with another leader. 

This was the second Spanish election in six months, after a December poll ended in a virtual four-way tie and left the incumbent conservative, Mariano Rajoy, a lame duck prime minister — attending key summits in Brussels and presiding over government but unable to get any legislation through parliament. It's a position he's likely to continue in. The same parties won roughly the same proportion of votes, but the Popular Party gained 14 seats. 

Spain's Ibex stock index suffered a historic fall Friday, dropping 12.35% on news of Britain's vote to leave the EU. "Worst Session Ever," read the banner headline in a leading business daily. About €64 billion euros ($71 billion) was lost. Hours later, Rajoy told voters it was "no time for experiments" and urged them to choose the continuity of his conservative party. 

Spanish markets rebounded Monday on news of the Popular Party victory, but then closed down 1.83%, at their worst level in three years. 

"This party, in moments of difficulty and problems, has been there. It's an option Spaniards support," Rajoy told cheering supporters early Monday from the balcony of party headquarters in Madrid. "We're proud of our work…. It's been tough and complicated." 

In office since 2011, Rajoy, 61, is known for his bland demeanor and one of the lowest approval ratings of any sitting Spanish leader. He ran for reelection on his handling of the economy. During a punishing recession, Spain avoided a sovereign bailout from Europe, but received a smaller €100-million bank rescue in 2012. With 3.2% growth last year, Spain's economy is now one of the most robust in Europe. 

But youth unemployment remains stuck at 46%, and many young Spaniards backed Unidos Podemos. The alliance is only months old, combining the traditional far-left, Izquierda Unida, or United Left, which includes Spain's communist party, and Podemos, a two-year-old party that grew out of street protests and Spain's Occupy movement. 

Its leaders are a 30-year-old communist and a 37-year-old former political science professor with a ponytail. They promised to fight the corruption that has tainted Rajoy's conservatives, find jobs for youth, hike taxes on the rich and on corporations, and stop home foreclosures. 

"Of course Rajoy doesn't want any change! He's perfect, up there in the presidential palace," joked Jaime Nolla, 34, who flew home from Germany, where he moved in search of work two years ago, to vote in Madrid for the leftists. "We need new things. We have to rethink Europe — what kind of Europe we need and we want to have." 

Spaniards are overwhelmingly pro-European. A recent survey showed 74% want more European integration, not less. The EU has transformed Spain, with public infrastructure investment and access to credit. All major Spanish factions back continued membership; there is no danger of a Spanish exit from the union. 

Tricky coalition talks are likely to continue all summer, as Spain tries again to break its political stalemate. 

Frayer is a special correspondent.

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