Halister News

(Bloomberg) -- The downside risks have risen significantly and the challenging global economic environment, market volatility, political uncertainty and a sizable fiscal slippage in 2015 make Spain assets a candidate for underperfomance, Barclays economists Apolline Menut and Antonio Garcia Pascual write in client note.

• This is especially the case as U.K. exit risk may keep markets on high alert in the weeks ahead
• An agreement to form a government by the May 2 deadline looks highly unlikely after talks between PSOE, Ciudadanos and leftist Podemos party didn’t break the political deadlock
• Barclays’s base case is new elections on June 26
• Although opinion polls suggest Parliament would still be fragmented after the vote, expect a swift agreement on a new government as pressure on the main parties to reach agreement would be high
  • It may be more difficult for a minority government to implement structural reforms or fiscal consolidation, and there’s a non-negligible risk that it doesn’t serve a full-term
  • Don’t expect Podemos to be part of the next govt
• Raise 2016 GDP forecast to 2.6% vs 2.4% previously as 1Q indicators suggest solid growth was maintained and there’s no evidence of a politics-induced slowdown so far