Last updated: February 24, 2016 6:02 pm

Spain’s Socialists and centrist party sign pact

Tobias Buck in Madrid

Socialists' (PSOE) party leader Pedro Sanchez (L) and Ciudadanos party leader Albert Rivera leave after the signature of an agreement in Madrid, Spain, February 24, 2016. REUTERS/Juan Medina©Reuters

Socialist party leader Pedro Sánchez, left, and Ciudadanos leader Albert Rivera

Spain’s Socialist party has signed a government pact with the centrist Ciudadanos movement — the first concrete step towards breaking the country’s two-month-old political deadlock but one that leaves Socialist leader Pedro Sánchez still short of a parliamentary majority.

Spain has been without a proper government since an inconclusive general election in December that saw heavy losses both for the Socialists and the ruling Popular party. Mr Sánchez was handed the job of forming a government earlier this month, after Mariano Rajoy, the acting prime minister and leader of the conservative PP, declined the king’s mandate.

The Socialist leader will formally present his candidacy to parliament next week, and has until March 5 to get the backing of MPs to become prime minister. For that to happen, however, the votes of Socialist and Ciudadanos lawmakers alone will not be enough. Together, the two parties account for just 130 seats in the 350-seat legislature, meaning they will need either the PP or the anti-austerity Podemos movement to back Mr Sánchez’s bid or abstain.
“This is the first step towards the political change that we need in this country,” Mr Sánchez told a news conference in Madrid on Wednesday.
The deal with Ciudadanos sets out a detailed reform programme that covers 66 pages and was hailed by Mr Sánchez as a “historic” achievement.

Mr Sánchez said the government deal had been carefully worded so as not to exclude other parties. “It extends a hand both to the left and to the right,” he said.

But the initial response from Podemos and the PP was unmistakably hostile, with both parties insisting they would vote against Mr Sánchez. He faces an additional hurdle before next week’s parliamentary vote, in the form of an internal party referendum on the deal he unveiled together with Ciudadanos leader Albert Rivera on Wednesday.

The agreement offers a blend of policies from the two parties, with a heavy emphasis on the fight against corruption, constitutional reform, an emergency package of social measures and a fresh overhaul of Spain’s recession-scarred labour market.

It calls on the European Commission to allow Madrid more time to meet its budget deficit targets — a stance that is widely shared across the political spectrum in Spain but is certain to raise concerns in Brussels.

The Socialists and Ciudadanos promise not to raise income taxes on the “working and middle classes” but suggest a new wealth tax and new environmental taxes.

The two parties also plan to scrap the Rajoy government’s widely praised 2012 labour market reform, and to radically reduce the number of job contracts that can be used by Spanish employers.

The shift is designed to end the deep gulf that currently exists between workers with a permanent contract and temporary staff. The joint programme does not, however, include the commitment to introduce a single employment contract — a key plank of the Ciudadanos platform.

For the PP, which regards the earlier job market reform as one of its core achievements, the promise to roll back the 2012 overhaul is still likely to be an insurmountable obstacle to joining the pact.

Podemos, meanwhile, responded to the deal by formally breaking off its own coalition talks with the Socialists. “The choice made by the Socialists is not compatible with us,” said Íñigo Errejón, a senior Podemos leader, who denounced the accord for offering only “cosmetic” changes to the country.