Spain looks like it is set to go the same way as Greece in 2016 following the Spanish governments failure to secure a majority vote over the weekend.
Investors say they fear a major eurozone rupture in 2016 which will echo the Greek debt crisis that caused markets to crash earlier in 2015.
Spain’s far-left anti-austerity party Podemos – similar to Greece’s Syriza party – enjoyed unprecedented support, showed election results.
Prime minister Mariano Rajoy’ People’s Party must now form a tricky coalition government, although it is unlikely to be with Podemos, which spells weeks of uncertainty ahead for investors.
And critics fear the new Government may start to turn its back on reducing the country’s huge debt mountain, which could once again plunge the union into crisis further down the line.
The election result took the wind out of European markets this morning, with the Spanish main market the Ibex falling by almost 3 per cent.
However, Britain’s FTSE 100 managed to shake off the news to rise by almost 1 per cent, as oil and mining stocks opened in the green.
Connor Campbell, financial analyst at SpreadEx, said: “It’s like the Greek election saga in a minor key, one that poses a host of new problems for a country that has spent the last few months gradually sinking to the bottom of the eurozone’s unofficial performance chart.
“The political and economic issues that are likely to follow the weekend’s election initially tempered investors’ appetites on the continent, before the CAC managed to eke out a 20 point rise and the DAX surged by 100 points.”
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