Spain's acting Prime Minister and People's Party leader Mariano Rajoy attends an investiture debate at parliament in Madrid, Spain August 31, 2016. REUTERS/Juan Medina(reuters_tickers)
MADRID (Reuters) - Spain's acting Prime Minister Mariano Rajoy will on Friday make his second attempt this week to win the confidence of parliament to form a government, though the conservative leader's likely failure will start the countdown towards another election.
After inconclusive national elections in December and then in June, a stand-off between rival parties is edging Spain closer to another ballot at a time when the eight-month political deadlock is already threatening an economic recovery.
Rajoy, leader of the centre-right People's Party (PP), stumbled at the first hurdle to try and win a second term on Wednesday when he fell six short of the 176 votes needed for an absolute majority in the 350-seat assembly.
In Friday's vote, due around 1800GMT, a simple majority would enable Rajoy to form a PP-led minority government. He would need just 11 abstentions to win this time; but opponents, including the Socialists who voted unanimously against him earlier this week, have so far shown no signs of ceding.
If, as expected, Rajoy loses the vote, he and other candidates would have until Oct. 31 to try and form a government before another election is automatically called. The next ballot could fall on Christmas Day.
The impasse is beginning to weigh on Spain's strong three-year economic rebound from recession which saw the country post one of the highest growth rates in the euro zone in the second quarter.
Bond yields have crept higher this week, increasing the government's borrowing costs as investors become more cautious. Opinion polls so far have shown that a third election would deliver another hung parliament.
Acting Economy Minister Luis de Guindos warned on Thursday that the economy could slow down as investments are frozen due to the uncertainty. Spain will also fail to meet its budget commitments for 2017 unless it gets a stable government soon, he added.
The lack of a central administration has meanwhile put a hold on the hiring of top-ranking civil servants.
The Spanish stock market regulator is due to lose its head, Elvira Rodriguez, in early October as her posting comes to an end. As things stand she cannot be replaced without a government to appoint a successor, weakening an organisation that oversees capital hikes, stock market flotations and corporate bond issues.
LOCAL ELECTION IN FOCUS
If Rajoy loses this second vote, the focus will shift to regional elections on Sept. 25 in the Basque Country and Galicia.
Rajoy's anti-regionalist rhetoric has damaged his standing with Basque and Catalan parties that have traditionally helped support minority governments at a national level.
But depending on the outcome of the Basque ballot, the PP could try to get support from a small conservative party there, the PNV, for another parliamentary vote of confidence at a later stage in exchange for helping it govern at a regional level.
In addition, the Socialists may be more open to negotiations once these elections are out of the way, as the party does not want to risk losing regional votes amongst its supporters by allowing a second PP-led government beforehand.
(Reporting By Sonya Dowsett, Editing by Sarah White and Ralph Boulton)