Spain’s Pedro Sánchez is closing in on a deal with Catalan separatists to remain in power.

The caretaker prime minister has the support of the far left to form a new government, but he also needs the backing of regional parties, who hold the balance of power in Congress.

Sánchez’ Socialist Party does not have a majority of its own.

Junqueras

The main sticking point in negotiations with the Republican Left, the largest pro-independence party in Catalonia, has been the fate of its leader, Oriol Junqueras.

Spain’s top court sentenced Junqueras to thirteen years in prison in October for leading a failed independence push in 2017.

However, he was elected to the European Parliament in May while in pre-trial detention. Spain argued Junqueras’ election was illegitimate, but the European Court of Justice disagreed, ruling two weeks ago that Junqueras became a member the European Parliament — with parliamentary immunity — the moment was elected.

The Republicans insist Junqueras must now be released from prison. Spain’s solicitor general agrees, but she also argues the European Parliament should suspend Junqueras after swearing him in, which would send him back to the prison.

Sánchez could pardon Junqueras, but that would outrage the Spanish right, which considers him a traitor.

Concessions to Catalans

Sánchez did agree to resume dialogue between the Spanish government and the Catalan regional government in Barcelona, which has been virtually nonexistent since the region tried and failed to break away in 2017.

His coalition agreement with the far-left party Podemos specifically calls for a political solution to the independence crisis. This is in itself a victory for Catalan nationalists, who have long resisted Madrid’s legalistic approach. Sánchez’ right-wing predecessor, Mariano Rajoy, refused to even hear out Catalan demands for more autonomy and a legal independence referendum, insisting that both were impossible under current law.

The coalition deal also calls for the transfer of competencies that were previously promised to Catalonia but have not yet been granted, including power of labor law, maritime rescue and scholarships.

It hints at minimizing shared powers in health care, infrastructure, law enforcement and social security to “avoid ambiguity” as well as a new funding model to resolve the “shortcomings, asymmetries and ambiguities of the current system.”

Another longstanding Catalan demand is for fiscal rights similar to the Basques, who collect their own taxes and send part of the money to Madrid. Catalonia collects only a portion of its taxes. The bulk is collected by the Spanish government, which then sends part (less) back to Catalonia.

Other policies

Other measures in the coalition agreement include:

• A 2- to 4-point increase in taxes on income over €130,000.
• An increase in tax on capital gains over €140,000 from 23 to 27 percent.
• A minimum 18-percent corporate tax for banks and energy companies (compared to 15 percent for others).
• An increase in the minimum wage from €1,050 to €1,200 per month. Spain’s current minimum wage is almost €500 lower than in France.
• Making it illegal for companies to fire workers who are ill.
• Decoupling pensions from life expectancy and economic growth.

The last reform will not be received well in Brussels, where the European Commission has for years advised Spain to put its pension system on a more sustainable footing.

The last right-wing government raised the retirement age to 67, but that did little to close the gap between what Spaniards pay into the pension system and what they take out. The difference grows by around €18 billion per year.

Still short

Sánchez has the support of:

• Podemos: 35 seats
• Basque Nationalist Party: 6 seats
• Más País: 2 seats
• Més Compromís: 1 seat
• New Canaries: 1 seat
• Regionalist Party of Cantabria: 1 seat

With the 120 seats of his own Socialists, that puts Sánchez at 166 out of 350 — ten short of a majority.

The Republican Left, with thirteen seats, is not expected to vote for Sánchez. Rather, they would abstain from his investiture.

Assuming Sánchez falls short of an absolute majority of 176 on his first try, he would only need a simple majority (more votes in favor than against) on a second ballot.

The right-wing People’s Party, Vox, Citizens, Navarrese People’s Union and Asturias Forum have 153 seats.

The left-wing Basque party, EH Bildu, and the other two Catalan independence parties are also expected to vote against Sánchez, which would put his opponents at 168.

It is not yet clear how the conservative Canarian Coalition, the center-left Galician Nationalist Bloc and the new Teruel Exists party, which all have one seat each, will vote. They could make the difference between the first coalition government in Spain since the Civil War or the third election in a year’s time.