The seven months that Pedro Sánchez takes as a tenant in La Moncloa are not exactly a path of roses from the economic and financial point of view. The markets have not finished digesting the policies of the Socialist Executive well, judging by the evolution of the main macroeconomic and stock market indicators. To this have been added the bad perspectives at global level that, irremediably, affect to a certain degree the good progress of the Spanish economy.
Since Sanchez took office as president of the Government on June 2, the reaction of the markets has not exactly been desired. In this time, the risk premium has shot up 42%. This indicator, which measures the difference between the yield on the 10-year Spanish bond and the German "bund", was 90 basis points on June 4, the first working day after Sánchez's arrival. Yesterday it moved around the 128 points, which is a rise of 38 points.
Tomorrow, the Government plans to approve the General State Budgets for 2019 in the Council of Ministers. It will do so with the vigilance of the markets and the European Union, pending the adjustment of the new public accounts with the commitments made by Spain to reduce of the public deficit. Brussels and the parquet will have in their sights budgets in which everything points that there will be more taxes and much more public spending to make effective the promises of Sanchez to its partners of Unidos Podemos. In any case, the support is diffuse and it is not clear that the government is able to carry out some accounts that the markets will analyze very closely. Especially considering the negative evolution of the Spanish stock since Sanchez governs.
On June 4, the Ibex 35 was at 9,750 points. Yesterday, the main stock market indicator of Spain closed at 8,823 points, almost 1,000 less. This supposes a setback of almost 10%. However, the fall of the Ibex in this period is not exclusive to the Spanish stock market, but affects all the major European parks. In fact, Madrid is the one that falls the least, followed by London, which in these seven months has dropped by 11%. Paris has left 12%, Milan 13% and Frankfurt 15%.
The same does not happen with the risk premium, where Spain still carries the collateral effects of the crisis and is far above the large EU countries, except Italy. Germany is the country that sets the standard for risk premiums, so it is obviously not subject to this indicator. For France, the premium is only 50 basis points, while it rises to 103 points for the United Kingdom, compared to 128 for Spain. Italy doubles the Spanish data, with the bonus at 268 points.
The Spanish ten-year bond was yesterday at a yield of 1.5%, which is 13% more than the 1.33% that investors demanded from Spain in June, when Sánchez became president of the government. The bonus increase is much lower than the risk premium because, in addition to the rise of the Spanish bond itself, it is necessary to add the fall to almost half of the German bond. The "bund", traditional refuge value in times of uncertainty, has dropped by 45% in the last seven months, which has multiplied the rise experienced by the Spanish risk premium.