The budget defeat came after Catalan separatists turned their back on Pedro Sanchez’s Socialist Party government amid an increasingly fragmented political landscape. Party insiders hinted Mr Sanchez had vowed to call a snap election if the draft was rejected, with April 14 or April 28 the most likely dates. He is expected to announce his decision after a weekly cabinet meeting tomorrow.
Spain, the euro zone’s fourth-largest economy, emerged in 2013 from a deep economic slump that slammed the country with crippling levels of unemployment.
But it has been plagued since by growing political volatility, driven by deep divisions over Catalonia’s independence drive and by the emergence of several new parties.
Mr Sanchez left parliament straight after losing the budget vote, while opposition parties urged him to call elections immediately.
Albert Rivera, leader of the centre-right Ciudadanos party, said: “Mr Sanchez, that’s enough, it’s over. Call elections now!”
Conservative People’s Party leader Pablo Casado said the vote, which was 191 against to 158 in favour with one abstention, was effectively a vote of no confidence against Mr Sanchez.
He said: ”Today, it is clear that we’ve come to the end of the road, that this agony can’t go on any longer and that Spain needs a better government and it deserves it as soon as possible.”
Mr Sanchez only took office last June after the previous conservative government of Prime Minister Mariano Rajoy – plagued by a corruption scandal – was ousted in a no-confidence vote.
But the Socialist party holds less than a quarter of the seats in parliament and needs support from smaller regional parties, including the Catalans, to get legislation through.
Political sources say Mr Sanchez wanted an election as soon as possible, to move away from the budget defeat and mobilise left-leaning voters following a large protest in Madrid on Sunday against efforts to ease tensions with Catalan separatists.
That show of discontent was organised by three right-wing parties, including the far-right Vox that has jumped in opinion polls.
Opinion polls in recent weeks have shown that no single party would win enough votes in a general election to rule on its own.
The Socialists are ahead but have lost steam, while the conservatives, Ciudadanos and Vox could together have a majority.