By Charlie Devereux and Belén Carreño
MADRID/BARCELONA (Reuters) -Spain was trapped in a political gridlock on Monday after right-wing parties failed to clinch a decisive victory and no clear winner emerged from a national election, leaving pro-independence Catalan and Basque parties as potential kingmakers.
The results from Sunday's vote left neither the left-wing nor right-wing blocs with an easy path to form a government. Spanish stocks fell and government bond prices dipped in early trading.
A second election is a possible outcome.
The centre-right People's Party (PP) and the far-right Vox won a combined 169 seats in parliament - short of the 176 seats needed for a majority and confounding poll predictions. The ruling Socialists (PSOE) and far-left Sumar won 153.
After winning the most seats, the PP will be given the first stab at trying to cobble together enough votes in parliament to win a prime-ministerial investiture vote.
But its alliance with the far-right Vox and tough stance on separatism will make it difficult to gain support from any other faction.
The results showed the deep divisions in Spanish society. Prime Minister Pedro Sanchez called the elections in a gamble after his Socialist Party took a drubbing in local elections in May.
His political opponents highlighted his reliance on the regional separatist parties, saying this threatened the nation itself.
The PP however, had looked set to need a alliance with Vox to govern, an outcome that would have brought hardline nationalists into government for the first time since the end of the Franco dictatorship and Spain's return to democracy in the 1970s.
As it happened, the Socialists performed better than polls had predicted, helped by a last-minute gaffes by Feijoo.
Feijoo nonetheless claimed victory.
SEPARATIST DEMANDS
Sanchez's Socialists have more options for forming a government but face potentially unpalatable demands from Catalan separatist parties. Those will include insistence on an independence referendum, triggering the kind of political chaos seen in 2017 when Catalonia last tried to break from Spain.
Sanchez could win over left-wing separatist party Esquerra Republicana de Catalunya (ERC), as he did to form a minority government in 2020. But he will likely also need the backing of the more hardline Junts, which has not supported Sanchez in the past four years.
The Catalan leader who is emerging as potential kingmaker is Junts party leader Carles Puigdemont, who living in self-imposed exile in Belgium since the failed independence bid.
"The PSOE is at the mercy of Puigdemont," said Ignacio Torreblanca, head of the Madrid office at the European Council on Foreign Relations.
"Puigdemont or deadlock," said the right-wing ABC newspaper.
Centre-right Junts has not conveyed a clear position. Its candidate for Congress, Miriam Nogueras, said any backing would be in return for a new independence referendum and investment guarantees. The Socialists oppose independence and any vote on the issue.
The seats of Basque parties are also likely to come into play.
"After the election, we have a very, very difficult parliamentary arithmetics, but it seems our votes will be once again decisive," Andoni Ortuzar, leader of moderate nationalist Basque party PNV, said on Sunday night. PNV secured five seats in the lower house.
"If it depends on us, 'no pasaran'," said Arnaldo Otegi, the head of Basque separatist EH Bildu party, using a civil war-era Republican slogan, meaning "they shall not pass", in reference to PP and Vox. His party got 6 seats.
The likely slim margin of an investiture vote means even the single seat obtained by other regionalist groupa - from Canary Islands, northwestern Galicia and northeastern Navarra - could turn decisive.
Speaking to jubilant supporters outside the PSOE's
central Madrid headquarters late on Sunday, Sanchez said
Spaniards had rejected the "backward-looking bloc, which
proposed a total repeal of all the progress we have made over
the last four years."
In a more muted address at the PP headquarters across town,
Feijoo insisted his party had won the election and would seek to
avoid uncertainty by speaking to all willing parties to form a
government. Vox leader Santiago Abascal said Sanchez could block
any attempt by the right to form a government.
The law does not set a deadline for the process
but if no candidate secures a majority within two months of the
first vote on the prime minister, new elections must be held.
(Reporting by Charlie Devereux, Belen Carreno in Madrid and Inti Landauro; additional reporting by Joan Faus in Barcelona; Editing by Cynthia Osterman and Angus MacSwan)
