Por una cabeza

Pedro Sanchez’ gamble to call a snap election paid off. His PSOE has become the biggest party in parliament, its share of the vote at least 10% points ahead of any other. Yet one is left with a lingering sense of fragmentation, especially on the right. And the PSOE will struggle to form a coalition without confronting the Catalan independence issue. The economic cost however is not likely to be too high. As long as the country’s relative growth rate holds up, we don’t expect Spanish yield spreads to rise much. We remain short the euro against the US dollar.

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