JOSE JORDAN | AFP | Getty Images Spanish Prime Minister and presidential candidate for the Spanish Socialist Party (PSOE) Pedro Sanchez waves to supporters during a campaign rally in Alicante on April 20, 2019 ahead of the April 28 general election.
Spain is holding a snap election on April 28 and the vote may throw up some surprising results that could have ramifications for the wider political landscape in Europe.
CNBC explains why the country's latest general election — its third in four years — matters.
Why a snap election?
Prime Minister Pedro Sanchez, the leader of the Spanish Socialist Workers' Party (PSOE), called the election in February. This came after Catalan pro-independence parties, on whose support Sanchez's minority government relies, joined forces with the center-right opposition and rejected the government's 2019 budget proposals.
Sanchez has been at the helm of government for less than a year. He came to power in June 2018 after a vote of no-confidence in the previous People's Party (PP) administration, under conservative Mariano Rajoy.
Spain's general election in 2015 resulted in a hung parliament that the main parties could not resolve, leading to a fresh vote in 2016 that saw Rajoy re-elected as prime minister.
Who's in the running?
The main political parties are as follows:
– The left-wing Spanish Socialist Workers' Party (PSOE)
– The center-right People's Party (PP)
– The far-left Unidos Podemos (United We Can) party
– The centrist Ciudadanos (Citizens' Party, or Cs)
– The populist, far-right Vox party
There is a plethora of other smaller parties and alliances, including rival blocs that advocate independence in Catalonia: the Republican Left of Catalonia (ERC) and Sovereigntists, and Together for Catalonia (JxCat).
Vox is a relative newcomer to the political establishment as it was founded in late 2013. It employs a brand of right-wing populism and nationalism with an emphasis on conservative family values.
David Ramos | Getty Images News | Getty Images Supporters of far right wing party VOX wave Spanish and VOX flags as they attend a rally at Palacios de Congresos on April 17, 2019 in Granada, Spain.
The party has resonated with voters that are disaffected with government attempts to deal with regional separatism (a cause it vehemently opposes) in the Basque Country and Catalonia, and, to a lesser extent, immigration.
In late 2018, Vox made waves by winning 12 seats in Andalusia's regional election, far exceeding a prediction it would only win two or three seats.
Who's expected to win?
Opinion polls in recent weeks have consistently signaled that Sanchez's socialists could win the largest share of the vote — but not enough for the party to govern alone.
The party has been overseeing a minority government with just 84 seats in the 350-member Congress of Deputies, Spain's lower house of parliament. In this election, it could gain as many as 54 seats — but that would still fall short of the 176 seats a party needs to gain a majority.
Opinion polls have consistently showed that the PSOE leads by a wide margin and is seen with between 28 to 31% of the votes. The PP is trailing with around 20-24% of the vote. Ciudadanos is seen with around 15% and Podemos with around 12-13%. The Vox party is seen getting around 9-11% of the vote.
A large number of voters (25-30%) remain undecided as to who to vote for, and this could have a significant impact on the final result.
Speculation is already mounting over what alliances PSOE could seek to enable it to form a government. Anna Rosenberg, partner and head of Europe and U.K. at Signum Global Advisors, told CNBC that the socialists were benefiting from the fragmentation on the right.
"People are really scared of the rise of the right-wing parties and that will mobilize voters that might not have been expected to vote before. Sanchez has also actually done quite well and doesn't represent the status quo," she said.
Catalonia foreign minister: PM knows independence vote is unavoidable
Some have also predicted that a right-wing coalition could be formed by PP, Ciudadanos and Vox or that the socialists could try to form an alliance with Podemos and regional parties, like Catalonia's separatists.
Rosenberg said the socialists could equally try to form an alliance with center-right party Ciudadanos — a party that is staunchly against Catalan independence and not an obvious bedfellow for the PSOE — but an alliance that could nonetheless work.
"PSOE has said it won't do this (an alliance with Ciudadanos) but they've had such an alliance in the past and actually, the parties are not too far apart on the Catalonia issue. This government could be quite stable, both parties are pro-Europe, but the government would not be so friendly to Catalonia," she said.
She believed the most volatile scenario would be an alliance between the PP, Ciudadanos and Vox, a coalition that would likely reinvigorate tensions with Catalonia.
What's at stake?
Whoever wins the election will have to focus on boosting the economy and job creation. They will have to maintain a reform drive to make the country more competitive but tackle a rise in nationalist sentiment and the thorny and unresolved issue of pro-independence parties in Catalonia pushing for another referendum.
Spain's economy has recovered in recent years following its major banking crisis, prompted largely by the bursting of a property and construction bubble. However, in its latest winter forecasts, the European Commission predicted a slight slowdown in gross domestic product (GDP) growth of 2.1% in 2019 and 1.9% in 2020.
A slowdown was envisaged because of a predicted decline in private consumption, the Commission noted, and risks posed by a more uncertain global economic outlook. Noting that Spain's economic fundamentals are "robust," Economy Minister Nadia Calvino told CNBC this month that the socialists' aim is to maintain reform efforts and to attract investment.
David Ramos | Getty Images News | Getty Images Demonstrators wave Pro-Independence Catalan flags during a demonstration as part of the celebrations of the National Day of Catalonia on September 11, 2014 in Barcelona, Spain.
How investors and markets react to political change in Spain really depends on how easy it is to form a coalition government, and what form that government takes. Signum Global's Rosenberg believed a government would not be formed ahead of European parliamentary elections at the end of May, at least.
She also stressed that Spain's government finances would come under pressure whoever came to power. "The fiscal situation in Spain has improved. But the socialist government will want to spend more, and lower growth in Europe will put pressure on government finances … Whoever is in power is going to face more pressure from the EU to limit spending in order to bring down the deficit. So, although the economy's been doing pretty well you could start to see the tide turning."