Rajoy’s Second Term Closer in Spain as Ciudadanos Softens Stance

(Bloomberg) -- Mariano Rajoy moved a step closer to breaking seven months of political deadlock in Spain, after the pro-market Ciudadanos party said it would hold talks with the acting prime minister if conditions are met.

Rajoy's People's Party must accept six measures for negotiations to go ahead, including the creation of a parliamentary committee to probe a slush fund it is alleged to have used, Ciudadanos' head Albert Rivera said in a press conference in Madrid on Tuesday. The fund is already the subject of several court investigations. The PP must also agree to a new electoral law to reduce the premium placed on rural voters over those in urban areas, Rivera said.

Rivera's change of stance is the biggest development since the general election in June -- Spain's second in six months -- failed to produce a winner capable of forming support for a majority to pass next year's spending plan, and to steer efforts to reduce the budget deficit. Combining Ciudadanos' 32 lawmakers with the 137 from the PP would leave Rajoy only seven lawmakers short of a majority in the 350-seat lower chamber.

“If the PP accepts these conditions and also sets a date for a confidence vote, everything is possible,” Rivera told reporters when asked if Ciudadanos is willing to support Rajoy.

Allegations

Rivera had previously ruled out support for Rajoy because he said the acting premier had failed to clear corruption allegations against him and his party. Ciudadanos was instead offering a “technical abstention” to help the legislature get back to work. Rajoy has denied any wrongdoing.

The political shift also add pressure on the Socialists' 85 lawmakers, the second-largest party, to soften their stance. The group's head of economic policies Manuel de la Rocha, speaking in an interview with Cope radio on Aug. 7, opened the door for talks if Ciudadanos expressed willingness to support Rajoy. Other party officials have yet to confirm that position.

Ciudadanos also wants terms for prime ministers to be capped at eight years, and the removal of protections for senior officials and lawmakers from legal cases, Rivera said. Any politician named in a court corruption probe must step down, and the government should be barred from pardoning people convicted in corruption-related cases, he said.

“The electoral law is the most difficult condition for the PP to agree to,” said Antonio Barroso, a political analyst at Teneo Intelligence in London. The party can agree to the others, including the corruption investigation that would happen regardless because the PP doesn't hold a majority, he said.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net. To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Stuart Biggs