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With the Rise of the Far-Right Vox Party, Spain’s Election Delivers Another Hung Parliament


By Brunello Rosa

11 November 2019  


Spain’s general election has resulted in yet another hung parliament. The final results suggest that the Socialist Party (PSOE) of the incumbent Prime Minister Pedro Sanchez has obtained a plurality of votes (around 28%), but very far from a level that would allow Sanchez to obtain a majority of seats in the Congreso De Los Diputados, the country’s main legislature at the national level. The Socialist Party will have 120 seats, out of the possible 350. Pablo Iglesias’ Unidas Podemos has collapsed, meanwhile, receiving only around 13% of votes and 35 seats. Podemos probably paid a political price for the intransigent position they had taken during the negotiations that followed the April 2019 election, which had failed to lead to the formation of a new Sanchez government. The new party born to the left of PSOE, Mas Pais, obtained 2.4% of votes (most likely from both PSOE and Podemos) and 3 seats. 

On the right of the political spectrum, the Ciudadanos party led by Albert Rivera has also collapsed in these elections, from 16% of votes and 57 seats to 6.8%of votes and 10 seats. Critics are saying the party has run out of “marketable” political material. It is also true that Ciudadanos’ intransigent position regarding the Catalan separatists had already paid off, with the incarceration and severe sentences of the leaders of the “rebellion”, and that its outlook is in any case well represented by the even tougher positions taken by the rising Voxparty. 

Vox, led by the controversial figure Santiago Abascal, has staged the best performance of all, rising from 24 seats in the previous legislature to 52 in the new one. It received 15.1% of all votes, which despite being only around half as many as the Socialists, is nevertheless a 30% increase from the votes Vox had received in April 2019. This is yet another confirmation that nationalist-populist parties are still strong in Europe, and still represent a serious threat to the European integration process. The People’s Party (PP), led by Pablo Casado, has also increased its votes (+4.1% to 20.8%) and seats (+22 to 88). Other parties, including regional ones from Catalonia and the Basque Country, gained a combined 42 seats.   




Where will Spain go from here? As we discussed in our in-depth election preview, Spain’s political stability is long gone, as the fact that this was its fourth general election in four years clearly shows. At the same time, Spain’s two traditional parties, PSOE and PP, plus the newer parties from the left (Podemos) and the right (Ciudadanos), cannot afford not to be able to form a government after this election. If they do not manage to form a government, there is a risk that the protest vote will rally around the newest party on the political scene, Vox, which has the potential to wipe out both Podemos and Ciudadanos and drain further votes from PP and PSOE. As such, we believe that these parties will do all it takes to form a government this time. 

Given the number of seats available, Sanchez is very likely to be given the first chance to form a government. He will probably go back to Podemos and try to form a majority with them and some of the other left-wing parties (such as Mas Pais) and regional parties, or if not a majority than at least a parliamentary bloc large enough to form a minority coalition government. If this attempt were to fail, the three right-wing parties (PP, Ciudadanos and Vox) might try to form a coalition – the same grouping that took over the Andalusian regional parliament in December 2018, following decades of unrivalled Socialist rule in that region. 

If neither of these two relatively “natural” solutions work out, Spain might instead try to form, for the first time in its recent history, a German-style “grand coalition” between PSOE and PP, which together would command a comfortable majority. A weaker form of this grand coalition could be a PSOE-only minority government, which can be formed thanks to the abstention of the PP (which, in this way, would “return the favour” that the PSOE did to Rajoy in 2016). But the risks deriving from this type of solution are well-known in those countries that have experienced them (chiefly, in Germany, Austria and, more recently, Italy). Grand coalitions tend to reinforce support for extremist parties, especially those on the right side of the political spectrum (AfD, FPÖ, and Lega, respectively). With Vox already on the rise, a PSOE-PP coalition is therefore a solution we believe will be attempted only at the very end, if all else has failed.   


Helicopter Drops of Money: The Pros and Cons of Monetised Fiscal Deficits to Fight the Next Economic Slump


by Nouriel Roubini and Brunello Rosa

13 November 2019

Flash Review: RBNZ Remains On Hold, But Is Prepared to Ease More If Needed


by Brunello Rosa

13 November 2019

Searching The Lost Political Stability: Spain’s Fourth General Election In Four Years


by Luca Bandello and Brunello Rosa

8 November 2019

Oil In 2020-21: In Absence Of Supply Shocks, Faltering Global Demand Will Dampen Oil Prices


 by Alessandro Magnoli Bocchi, Fawaz Al Mughrabi and Farah Aladsani 

23 October 2019

Bank of England Review: MPC Splits But Remains On Hold, While Signalling Possible Cuts Ahead


by Brunello Rosa

7 November 2019

POLICY COMPASS - Russia and The EU: The Geo-Strategic Implications of The Nord Stream-2 Gas Pipeline


 by  Paul Martin

15 October 2019

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The Geopolitical Corner by John Hulsman

The Syrian End Game And The New Rules Of The Multipolar World


5 November 2019

Introduction: Different Rules For A Different Era 

For all its hideous complexity, the overall importance of the approaching end game of the Syrian civil war is beguilingly simple: we now live in a new multipolar world with very different geostrategic rules governing it than the old bipolar Cold War era, as well as of the brief unipolar moment that followed. 

Presently in Syria, stability is in the process of being restored to this unhappiest of countries through great regional power condominiums. And this is the first lesson of the Syrian conflict: in the absence of superpower interest (meaning practically that of the US and China) eventually power vacuums will be filled by regional powers.

In this case, Russia (preserving its long-standing traditional alliance with Syria, the site of its only regional military bases) and Iran (bolstering its Shia crescent connecting Iran, Iraq, Lebanon, and Syria) have intervened decisively in the conflict, turning the tide in favour of the Assad regime. Today, apart from a last flicker of rebellion in the north-eastern province of Idlib, the Assad-Putin-Khamenei axis dominates the vital western seaboard of the country.

Seeing which way the wind is blowing, and left in the lurch by their erstwhile American allies, the Syrian Kurds – who have until now defeated the maniacal ISIS caliphate and conquered much of the less-populated northern and eastern interior in the process – belatedly turned for protection to Assad, and most especially Russia. 

For Turkey – perpetually affronted by Syrian Kurd ties to its perennial internal Turkish Kurd PKK enemy – has seized the opportunity American disinterest has created, invading (largely through proxies) northern Syria. Turkish President Recep Tayyip Edrogan’s forces have successfully dislodged the area from the Syrian Kurd grasp, establishing a safe zone free of their influence, where he hopes to re-settle some of the millions of the (non-Kurdish) refugees his country has been forced to host during the Civil War.

Critically, both the Syrian Kurds and Turkey have now turned to dominant Russia to sort out the mess, and accordingly a Moscow-brokered cease fire has been put into place, upholding Ankara’s gains but limiting them to the safe zone area. 

These facts on the ground (and Putin’s nifty bit of tactical diplomacy) have left Russian-proxy Assad dominant in most of the country, with the Syrian Kurds forced into the role of his uneasy allies, all the while Turkish concerns for its border and for limiting Syrian Kurd influence have been (at least temporarily) assuaged. 


So, the first general multipolar lesson the end game of the Syrian war teaches us is that over time, power vacuums formed by a lack of superpower involvement need not lead to endless chaos. Instead, after a period of mayhem, regional powers with far greater interests at stake than those of far-away Washington and Beijing will fill the void, creating stability as it serves their needs. 

No longer do we live by the bipolar Cold War rules, whereby – like any good Graham Greene novel – the superpower contest over local crises transcends anything organically going on in a country. Rather, in the new era there will be large swathes of the world – and Syria is a prime example as it is surely not a major strategic interest of either the US or China – where the superpowers will play only a secondary role. 


As Syria also illustrates, that does not mean that the locals will be left to their own devices. For good or ill, what it does signify is that regional powers – in this case Iran, Turkey, and Russia – will play the dominant role in resolving the crises where the superpowers decide not to get overwhelmingly involved. The rise of regional power autonomy will be a basic rule of the game for our new era long after the Syrian crisis flickers out.  

The Pottery Barn Rule Is Still In Effect 

Famously, in the run-up to the Iraq War, Secretary of State Colin Powell liked to caution heedless American neoconservatives about what he called the Pottery Barn rule: Echoing the famous store, he said if you break a country you have bought it. This second rule of our new epoch is a carry –over from the old Cold War era: it is easier to intervene in a country than it is to persevere, succeed, and get out. 

Again, Syria is the prime example, with Moscow having significant and under-reported strategic weaknesses that long-term involvement in Syria are likely to make glaringly clear over time. This simply cannot be said enough times: Russia has a GDP only the size of the state of Texas. This is no economic superpower. Moscow’s one-crop, undiversified economy is utterly dependent on the spot price of oil and natural gas. Frankly, it is best thought of as a corrupt, aging gas station with nuclear weapons. 

That is what makes all the unsubstantiated hype as to how it is now the master of the Middle East (again much of this nonsense is peddled by disappointed American interventionists) hilarious, if it were not so serious. Russia has successfully intervened to save its one true ally in the region. But now it is stuck with a country that has been burned to the ground, and Moscow scarcely has the economic wherewithal for the monumental task of rebuilding Syria. 

If the economics of Syria portend only chaos ahead, the politics are scarcely better. The Syrian Civil War burst into flame because the minority Alawite Assad regime was despised by much of the country. After hundreds of thousands have died, with peace imposed at gun point, it is highly unlikely these feelings of hatred have done anything but metastasise. Russia can in essence colonise Syria, much as the USSR did eastern Europe during the Cold War. But as in that case, at great cost it drained its highly limited economic resources away, all without winning over local hearts and minds. 

Regional powers will find, as superpower America did during the Iraq War, that countries are easier to militarily subdue than to successfully govern. Russia likely will be in Syria for a long, long, time as it proves a major drain on Moscow’s exchequer and political attention. Frankly, all serious US foreign policy analysts should welcome Moscow to drink from the poisoned Syrian chalice. As was true before, getting into a country is far easier than getting out of one.


(This is an excerpt of Dr. Hulsman's latest article, which you can read here)

Dr. John C. Hulsman is the widely-read Senior Columnist for City AM, the newspaper of the city of London. Dr. Hulsman is also a Life Member of the US Council on Foreign Relations. His most recent work, the best-selling, To Dare More Boldly; The Audacious Story of Political Risk, was published by Princeton University Press in April 2018 and is available for order on Amazon. He can be reached for corporate speaking and private briefings at 

Looking Ahead

The Week Ahead


Week 11 - 17 November 2019


Global Uncertainties To Weigh On Growth

In the US, in October, CPI inflation is expected to remain unchanged (c: 1.7% y-o-y; p: 1.7%), below the Fed’s 2% target. 

In the EZ, growth is expected to stall (GDP Q3, c: 1.1% y-o-y, p: 1.1%) and IP is expected to recover (IP Sep., c: -2.2% y-o-y; p: -2.8%), while remaining in contraction. CPI inflation is expected to stall (c: 0.7% y-o-y; p: 0.7%).

In Germany, economic activity is expected to shrink (GDP Q3, c: -0.3% y-o-y; p: 0%).

In the UK, Brexit worries are expected to show up in slower growth (GDP Q3, c: 1.2%; p: 1.3%). 

Japan’s economy is expected to weaken (GDP Q3, c: 0.8%; p: 1.3%).

In New Zealand, the RBNZ is expected to cut its official cash rate by 25bps to 0.75%.

The Quarter Ahead



Most Leading Indicators Remain Resilient, With No Signs Of A Global Credit Crunch

Globally, recession fears are receding – driven by: i) lower trade tensions: after an ‘interim deal’ is reached, the US and China might even cancel planned import tariffs, in stages; ii) a sturdy US economy; iii) a gentler-than-expected slowdown in Europe and China; and iv) declining geopolitical risks. The global economy’s synchronized slowdown could be mitigated by: 1) CBs liquidity; 2) a resilient US domestic demand; and 3) economic stimuli in Japan and China.

In the US, the House Intelligence Committee will hold the first public hearings in the impeachment inquiry, but President Trump is expected to keep delaying the process. The market probability of ‘no further rate cuts in 2019’ increased to 96% (p: 88). However, the New York Fed injected USD 62.5bn into financial markets, via overnight purchase agreements; these injections are aimed at ensuring that “the financial system has enough liquidity, and short-term borrowing rates remain well-behaved”.

In the UK, PM Johnson claimed “the Parliament is paralyzed, and a general election is the only way to break the Brexit deadlock and deliver the UK's exit from the EU”. Further gridlocks in the Brexit process are likely.  

Last week's Summary (4 - 10 November 2019)

Real Economy: Stagnant Growth, Subdued Inflation, Accommodative Central Banks

In the US, September’s factory orders fell more-than-expected (a: -0.6% m-o-m; c: -0.5%; p: -0.1), by the most in four months. While remaining in expansion, the PMI Composite recorded the softest pace since February 2016 (Markit PMI Composite Oct., a: 50.9; c: 51.2; p: 51.2). 

In the EZ, manufacturing showed signs of recovery (EZ Markit Manuf. PMI Oct., a: 45.9; c: 45.7; p: 45.7; Germany Manuf. PMI Oct., a: 42.1; c: 41.9; p: 41.9), but remained in contraction and at a seven-year low. German IP took another unexpected tumble in September (a: -4.3% y-o-y, c: -2.9%; p: -3.9), falling to early-2017 levels and adding to fears that Europe’s largest economy could suffer its first recession in over six years. 

In the UK and Australia, the BoE and RBA kept their key policy rates unchanged at 0.75%.

In Japan, PM Abe launched the country’s first economic stimulus package since 2016, to counter the impact of the global slowdown and of the higher consumption tax. 

In Turkey, inflation fell to its lowest level in almost three years (a: 8.6% y-o-y; c: 8.6%; p: 9.3), in line with expectations.  

Financial Markets: Eased Trade Tensions And Recession Fears, CB Easing Spur Risk Appetite

Market drivers: In the US, with nearly 4/5 of S&P 500 companies having reported, Wall Street analysts scaled back Q4 corporate earnings expectations to 0.8%, the slowest annual pace in four years. Yet, the shallower-than-expected earnings decline - along with a long-awaited report that the US and China will likely lift import tariffs - helped equities to rise to record highs. 

Stocks: w-o-w, global equity indices rose (MSCI ACWI, +0.8% to 543), driven by both DMs (MSCI World, +0.7% to 2,269; S&P 500, +0.9% to 3,093) and EMs (MSCI EMs, +1.5% to 1,065). Volatility continued to fall, well below historical averages (VIX S&P 500, -0.2 points to 12.1, 52w avg.: 16.7; 10y avg.: 16.9). 

Bonds: safe-haven yields recorded a significant increase; both US and German yield curves steepened (10y UST +21bps to 1.93%; 10y German +11bps to -0.27), as investors priced in some reflation. 

FX: w-o-w, the USD strengthened against a basket of currencies, as robust labor and services data supported the Fed's recent rate pause (DXY, +1.1% to 98.353), while the EUR (EUR/USD, -1.3% to 1.102) and the GBP (GBP/USD, -1.3% to 1.277) fell. The TRY weakened (USD/TRY, -1.2% to 5.766) despite improving inflation dynamics, hampered by geopolitical factors. 

Commodities: Oil prices rose (Brent, +1.3% to 62.5 USD/b). Gold prices sharply fell (Gold, -3.6% to 1,458 USD/Oz.), as optimism over the upcoming US-China trade deal boosted risk-on sentiment.

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