If the hound-of-hell heat wave wasn’t enough, Spain’s political temperature is also soaring ahead of divisive weekend election

Data last week showed that 2.3 million voters had applied for mail-in ballots, double the number of requests in the 2019 election, and a lot of work for the post office.

Among those braving the elements will be first-time voter Sofía Belén Vasco, who plans to return from her grandparents’ village in Extremadura, with its cool rivers and natural pools, to cast her vote in Madrid on July 23.

“I consider these elections to be very, very, very important,” 20-year-old Vasco, who is studying to be a teacher, told MarketWatch in an interview. “I want to be sure that the government continues to support students or even offer more support, like scholarships and help with rent … which has gone up so much, above all in Madrid.”

Vasco also addressed concerns about the fallout from an election that could see Spanish politics push to the right, as has previously been witnessed in Italy, Greece and Finland. “I’m really worried about the LGBT+ groups, who I think are really in danger when it comes to their rights,” said Vasco.

In office since 2018, Prime Minister Pedro Sánchez called a snap election in May after his Socialist Workers’ Party, PSOE, substantially lagged the center-right Popular Party, or PP, and the ultraright Vox in regional and municipal elections.

The public research institute Centro de Investigaciones Sociológicas has predicted PSOE will win 32.2% of the vote, with 30% going to the Alberto Núñez Feijóo–led PP. Earlier polls, though, had forecast the reverse. The Aragón region, dubbed Spain’s “Ohio,” has picked the winner since democracy arrived in Spain in 1977 following the death of dictator Francisco Franco, and it sees PP as the likelier victor.

Both sides would be expected to need support to form a government, raising the possibility that Vox would be invited to join a coalition.

Some 60% of Spaniards in one poll voiced concern over that tie-up, which PP hasn’t ruled out. Vox has 52 seats in Spain’s lower house, making it the third-largest party, after first entering the Spanish parliament following the April 2019 general election. Such a coalition would bring a hard-right party into the government fold for the first time since Franco’s death in 1975.

Vox’s platform formally pushes for addressing national needs first, but harsh views from members on immigrants, LGBTQ+ rights, gender equity and abortion access have garnered headlines and worries, alongside accusations of censorship in some places.

That angst may be working for the PSOE, with Sánchez’s “media offensive, taking advantage of the noisy negotiations between the PP and Vox at the regional level to try to mobilize left-wing voters and win back some centrist voters who might be tempted to support the PP,” Antonio Barroso, deputy director of research at Teneo, told clients recently.

Silvia Castellano Galán, a 49-year-old small-business owner in Madrid, sees much at stake this weekend. “From my point of view, and that of leftist voters, because an ultra-right-wing party could enter and help form a government, [it would be] a step back for the fundamental rights that we’ve already achieved,” she told MarketWatch.

“I will vote for [the progressive party] Sumar, although its platform has aspects that I am not all in agreement with, but it’s the closest to my interests,” she said.

Big promises

Some of the voter pique at the PSOE voter stems from the messy “only yes means yes” legislation that passed last year and ended up reducing prison sentences for hundreds of sex offenders.

Others haven’t forgiven Sánchez’s government for a pandemic-era derailing of the economy. “The lockdowns were really brutal in Spain, very long. I mean so many voters blame the government, which is the guys who are making the calls,” Javier Díaz-Giménez, professor of economics at IESE Business School, told MarketWatch.

From the archives (April 2020): Blinking in the sunlight: Children make halting return to Spain’s streets after weeks of coronavirus lockdown

A lengthy drought and intensifying water-availability issues in some parts of the country, possibly aggravated by record tourism in May, could also be a focal point of the election. Some cities where PP-Vox coalition governments have taken over since May have seen reversals of green polices, including, the Financial Times reported, closing bicycle lanes.

Díaz-Giménez said the Spanish economy, though, could be in far worse shape, considering the dual shocks of the pandemic and then Russia’s invasion of Ukraine. He said the impacts were blunted by government income support and price-control measures.

Miguel Ortano, senior analyst at the Elcano Royal Institute, added that Spain’s reduction of public debt and resumption of economic expansion took some time. “But the recovery to GDP has been way faster than in previous crises. And one has to understand that Spain was one of the countries hit the hardest because of, of course, mobility. Spain is highly dependent on tourism,” he told MarketWatch.

The EU has predicted Spanish economic growth of 2% in 2024, beating the bloc’s projected 1.7%, as well as the GDP expansions of France and Germany. But Spain remains tied to the EU mothership and the 14% gain for the main IBEX 35 index
IBEX,
+0.55%
to date in 2023 has been driven by banks such as BBVA
BBVA,
-1.37%,
climbing on interest-rate hikes by the European Central Bank. The Stoxx Europe 600
SXXP,
+0.32%
is up 7% so far in 2023, as compared with the S&P 500’s
SPX,
+0.03%
17%.

Diego Morín, a research analyst at IG in Madrid, told MarketWatch that any stock reaction will depend on how many votes the winning party gets and its need for coalition support in the formation of a government.

A win for the PP with promises of tax cuts might boost financial markets, said Morín. “The market wants stability and never a government that goes against the interests of the business sector or that keeps foreign investment away,” he explained.

But such a win coupled with a PP-Vox tie-up would hurt renewable-energy companies such as Iberdrola
IBE,
+1.45%
and Endesa
ELE,
+1.17%
because of opposition to purported “uncontrolled development of renewables,” he added.

Ultimately, the election will be less about the economy and more about “a sense of how the politics was done and respect for individual freedoms,” said IESE’s Díaz-Giménez.

The center-right party would likely keep Vox out of the main economic portfolios even in a coalition, according to Barroso and other analysts. The left did something similar in the past, sidelining the populist party Podemos on most economic issues, they said.

Among those voters who aren’t overly alarmed about such a tie up is 54-year-old Madrid resident Miguel, who declined to give his last name due to his work in the public sector. He said he had voted for PSOE before but will switch to PP this time. “The older I get, the more conservative I become,” he told MarketWatch.

Touching on another sore point with some voters, Miguel said he is unhappy that Sánchez relied so heavily on the votes of members of parliament from Catalan and Basque pro-independence parties in the past. “They don’t want to stay in Spain and don’t respect Spanish law,” he said.

There are echoes of that from the small-business owner Castellano Galán. Though she will cast her ballot for Sumar on largely ideological grounds, she allowed that taxes are preventing some smaller-scale employers from growing and creating jobs.

She said she’s tired of a “lack of empathy among politicians for the citizens.”