A centre-left alliance will make a last-ditch attempt to form a government tonight but Spain will face months of uncertainty if it fails.
The Socialist leader Pedro Sánchez faces a second parliamentary vote in his final attempt to become prime minister which, like the first, is likely to end in failure given lack of support from other parties.
Mr Sánchez stumbled at the first hurdle to form a coalition government with the centrists Ciudadanos on Wednesday when the centre-right Popular Party (PP) and the far left Podemos parties voted against his bid, setting the country on course for another election in two months.
Spain’s political parties have been engaged in ten weeks of deadlock to form a government after a December general election that failed to provide an overall winner.
Analysts warn that prolonged political uncertainty will make foreign investors wary of backing projects in Spain.
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Polls predict new elections will have a similar result to the last, with the PP winning most votes but failing to secure a majority.
Juan Carlos Martínez Lazaro, an economist with the IE Business School in Madrid, said: “If we cannot form a government a second time round in the summer it will mean we cannot bring in cuts necessary to meet Brussels’ deficit targets and investors will become worried about putting their money here.”
Spain’s target for 2016 is 2.8 per cent of gross domestic product but it is predicted that its real deficit will be 3.6 per cent.
After tonight’s vote, Mariano Rajoy, Spain’s caretaker prime minister, will make Mr Sánchez another offer to form a grand coalition – something the Socialist leader has repeatedly rejected.
However, PP insiders said that Mr Rajoy is already planning his strategy for the summer elections, hoping to win votes from Ciudadanos and the Socialists.
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Tonight Mr Sánchez must win a simple majority - more votes for than against - in the second vote of confidence.
On Wednesday he failed to capture an absolute majority by getting the endorsement of just 130 of the 350-seat parliament - well short of the 176 seats needed.
If this second bid fails, which is probable as opposing parties have said they will not change their vote, King Felipe can ask acting Mr Rajoy to try to form a government or wait for party leaders to put forward another candidate to try to seek a majority.