After eight months of political deadlock, socialist Prime Minister Pedro Sánchez was finally able to secure a simple majority in Parliament. The socialist party (center-left) and Unidas Podemos (left-wing) will govern together, pushing for more social spending and a partial reversal of the 2012 labor reform. Yet, the coalition will be fragile; the risk of early elections in the next year is moderate. The outlook for consumer-oriented sectors and SMEs will improve, and we see long-term benefits from productivity gains due to higher spending in education. Competitiveness will decline in the short term, and higher labor costs could indent profit margins (to below 40% of value added by 2023, down from a peak of 44.3%). Construction and services should be the most negatively impacted by a higher minimum wage, banking and energy by higher taxes, and real estate by rent control. More details in our latest report.