MADRID (BLOOMBERG) – Spain’s Socialists are set to win the greatest number of seats in Sunday’s (Nov 10) general election, but the fragmented results point to weeks of torturous negotiations for party leader Pedro Sanchez if he is to form a government.

With almost all the votes counted, the Socialists are projected to win 120 seats, three down from the previous vote in April, while the main opposition People’s Party jumps to 88 seats.

The Spanish nationalist party Vox more than doubles its representation to 52 seats. That leaves Sanchez, the acting premier, in pole position to claim a second term, but it’s far from clear how he’ll get there.

Even if he can win the backing of all his natural allies, he’ll still short of a majority in the 350-strong chamber.

His most obvious partner, the anti-austerity party Podemos, has seen its support shrink and relations with Sanchez have soured. So that coalition looks easier on paper than in practice.

To get over the line, Sanchez will rely on the backing of the Catalan separatist party. One other possibility would be for the PP to abstain in a confidence vote for the first time ever, letting Sanchez take office in the national interest.

IN A BIND

Sanchez faced similar political math after a general election in April and failed to clinch a majority, forcing Spaniards back to the polls for the fourth time in as many years.

The economy’s post crisis surge has so far proved resilient despite more than four years without an effective government, but the expansion is slowing now and the list of challenges facing the next administration – whenever it finally takes power – is growing.

“Spain must invest in its labor force to unlock further growth potential and that requires tough choices about public spending at a time of budget constraints,” Bloomberg Intelligence economist Maeva Cousin wrote in a report.

“Another inconclusive election result would probably mean the opportunity gets missed again.”

If Sanchez fails again, Spain would be heading to an unprecedented third ballot and he would be facing questions over why he opted for a second election rather than offering more concessions to reach a coalition agreement.

If anything, the situation will be tougher this time around with the collapse of potential centrist partner Ciudadanos. “Before there were options and they were ruled out,” said Ignacio Jurado, a political analyst with Quantio in Madrid. “Now the options are more complicated.”

Another way to break the gridlock would be for the center-right PP to stand aside in the interests of getting a government into power.

The PP would probably insist that far-left Podemos isn’t able to influence government policy.

NEW NORMAL

Sunday’s scattered results look likely to confirm that weak, minority governments have become the new political normal in Spain, at least until the country’s lawmakers are able to adjust to the new reality of a multi-party system at the national level.

Many voters say their lawmakers are clinging to the political order of old when Spanish national politics was for decades dominated by the center-left Socialists and the center-right People’s Party.

The immediate and direct cost of such political paralysis on the economy has been manageable. There have been some signs that Spanish businesses have put some investment plans on hold, but overall the country’s economy has continued to grow more robustly than its euro-area peers, such as Germany and Italy.

The long-term economic consequences, though, of Spain’s political stalemate are becoming increasingly evident. Lawmakers haven’t approved any major economic reforms since the aftermath of the county’s financial crisis more than half a decade ago.

The unemployment rate is still ticking downward and stands at 13.9% – but job creation has started to stall.

Economists say the unemployment rate is unlikely to fall much more because it’s bumping up against deep-seated structural impediments such as an over-reliance on temporary contracts and the small size of Spanish companies, which limits hiring.

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