Spain's Prime
Minister Mariano Rajoy (L) takes his oath during a ceremony at Zarzuela Palace
in Madrid, Spain, October 31, 2016. REUTERS/Chema Moya
Reuters - Mariano Rajoy was sworn in for a second term as Spain's prime minister on Monday but may struggle to form a cabinet that can overcome scars left by 10 months
The
conservative Rajoy was sworn in before King Felipe at Zarzuela Palace near
Madrid after winning a parliamentary confidence vote on Saturday, giving Spain
a fully-functioning government once more after two inconclusive elections and fruitless
coalition talks.
Rajoy's
appointment was not enough to dispel investor concerns over Spain's ability to
implement reforms and rein in a burgeoning deficit.
The country's
benchmark 10-year bond saw its yield drop slightly in line with most other euro
zone government bonds on Monday, while the country's benchmark IBEX stock index
.IBEX tracked a weak open across major European stocks.
Rajoy, who
will head a minority government with the weakest mandate in Spain's modern
history, is working on a new cabinet that must build cross-party support to
pass reforms in a hostile parliament.
His team, to
be announced on Thursday, will be scrutinized for signs he wants a fresh start
by bringing in new faces, even if most are expected to come from his People's
Party (PP). There were no immediate leaks on the new cabinet to the Spanish
press.
Rajoy, 61,
governed with an absolute majority in his first term and was often disdainful
of the opposition. Now he must convince opposition parties he is genuine about
working with them.
Spain suffered
a severe recession during Rajoy's first term when its banks needed a 41 billion
euro ($45 billion) European bailout but the economy is now recovering.
PUBLIC
DISAFFECTION
The
fragmentation of Spain's parliament arose from widespread disillusion with the
political establishment and the emergence of new parties at a time of economic
hardship, with unemployment peaking at 27 percent, and anger over corruption.
Rajoy has said
he is open to dialogue and negotiation, but in an uncompromising speech before
Saturday's vote, he urged opponents not to tie his hands, saying: "Spain
... needs a government that is capable of governing."
He will have
backing from the liberal Ciudadanos (Citizens) party, the fourth-largest group
in parliament, on a list of 150 previously agreed measures.
"Whatever
government there is, there will be a change of direction and there will be
reform measures," Ciudadanos lawmaker Jose Manuel Villegas told reporters
on Monday.
But even with
Ciudadanos' votes, Rajoy lacks a majority. He faces hardline opposition from
anti-austerity Podemos, the third largest party in parliament.
The
Socialists, the second biggest, are licking their wounds over their leaders'
decision to permit a Rajoy government after earlier blocking him.
Edoardo
Campanella, an economist with Italian bank UniCredit, said the new Spanish
government would be weak with every measure entailing "endless and
draining" negotiations.
"It is
hard to expect the adoption of major reforms like, for instance, a further
consolidation of the banking system or a further overhaul of the labor
law," he said in a note.
After 10 months
of paralysis, urgent issues await Rajoy's attention. First will be a new budget
for 2017 to appease Brussels and meet next year's deficit targets, which will
require either spending cuts or raising extra revenue.
Rajoy will
also have to respond to an independence push by the wealthy northeastern
Catalonia region, which plans a referendum next year on breaking away from
Spain.
(Additional
reporting by Sarah White, Angus Berwick, Abhinav Ramnarayan, Atul Prakash and
Reuters
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