Spain's struggle to form a new government has investors mulling a new sense of risk emanating from southern Europe. David Pollard reports.
A meeting in person - but certainly not of minds. Acting prime minister Mariano Rajoy's calls this week for a broad-based consensus government getting a sharp retort from Pablo Iglesias, leader of the anti-austerity Podemos. (SOUNDBITE) (Spanish) PODEMOS ANTI-AUSTERITY PARTY LEADER, PABLO IGLESIAS, SAYING: "We will not, actively or passively, allow the People's Party to govern." After Rajoy's People's Party, the Socialists came second in this month's inconclusive elections. They also say no to a coalition. For voters, the risk of another election appears to be on the rise. For investors, the risk to the economy. IG's Chris Beauchamp. (SOUNDBITE) (English): IG, MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "We have yet to see what shape the government will take and what is certain is that austerity is going to become much harder to implement as popular discontent rises." Consumers seem happy enough. Spanish shops took on staff at the fastest rate in eight years in the run-up to Christmas. Another sign of a rebound that's made Spain the poster boy of Europe. Panmure Gordon chief economist, Simon French. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "That has bought the administration, has bought the existing government of Rajoy a bit of time to do negotiations, because there isn't a burning platform that he's standing on. But that brief window of big monetary stimulus from the ECB and lower oil prices that have supported the Spanish economy, that will close quickly in 2016 if there isn't political certainty." French is among economists who see Spain's richest region, Catalonia, succeeding in its push for secession. That too a divisive issue complicating talks for a new government. While even within Catalonia, a split has emerged between its pro-independence parties - meaning more regional elections could beckon. And yet another possible faultline in Spain's slow political earthquake.