US investment banking giant JP Morgan Chase says snap elections in Spain “might lead to a more stable government, which would increase confidence and reduce uncertainty” following a series of corruption scandals.
Spain witnessed a 65 per cent drop in foreign direct investment in the four first months of 2025, compared with the same period a year before, the commerce ministry revealed.
The current amount of foreign direct investment, €2 billion, is the lowest since the Coronavirus pandemic.
While economic growth had so far not been affected, JP Morgan noted government scandals could harm consumer and investor confidence.
The US investment bank anticipated an economic slump in the next four months, and saw the Spanish Government’s reliance on a patchwork of small Catalan separatist parties for its parliamentary majority as risky.
The bank’s analysts described Prime Minister Pablo Sánchez’s crisis management measures as lacking and noted polls suggesting 60 per cent of the public supported fresh elections – even before the latest round of scandals.
Madrid’s stock market has remained stable, but Spain’s long-term debt has surpassed France’s in risk premiums.
Manuel Fraga from the Juan de Mariana Institute – a Liberal-leaning policy think-tank – called recent scandals affecting PM Sánchez’s Socialist government as “the biggest corruption affair in [the history of] Spanish democracy”.
Fraga added this was not only because of the number of scandals, but also insufficient responses by the decision-makers involved.
He said the scandal’s real impact was its effects on Spain’s external image, thus negatively influencing foreign direct investment.
“Political stability is an important factor to consider in any investment or economic analysis,” said Fraga.
