Spain faces coalition struggle after newcomers smash two-party dominance
Spain's opposition Socialist party has said it will vote against having acting PM Mariano Rajoy form a new government, killing one of his options to stay in power after voters elected a fragmented parliament.
Mr Rajoy's ruling conservative Popular Party came first in Sunday's general election, winning 123 seats but falling far short of the 176 seats it needs for a majority and losing a chunk of the 186 it won in 2011.
Mr Rajoy, seeking a second term, said he will "try to form a stable government" but has no immediately obvious partner with which to do that.
The Socialists came second with 90 seats and could seek a coalition with other leftist groups.
Two newcomer parties burst on to the scene, capitalising on many voters' disenchantment with high unemployment, constant corruption cases and the country's political status quo.
The far-left Podemos party gained 69 seats for third place, making it a possible kingmaker, while the centrist, business-friendly Ciudadanos party got an influential 40 seats.
"Spain is not going to be the same any more," jubilant Podemos leader Pablo Iglesias said.
Socialist party official Cesar Luena said Mr Rajoy's Popular Party, which won the most votes, should have the first crack at forming a government but ruled out supporting him, eliminating the possibility of an unprecedented coalition between the two parties which have dominated Spanish politics for decades.
Sunday's inconclusive result paves the way for weeks or possibly months of negotiations.
Craig Erlam, senior market analyst at OANDA in London, said Spain may now face an era of "political paralysis and instability".
Spain's benchmark Ibex 35 index was down 2% in trading on Monday, suggesting investor jitters following the result.
If forced out of government, Mr Rajoy's Popular Party would become the third European victim this year of a voter backlash against austerity measures following elections in Greece and Portugal seen as rebellions against unpopular tax hikes and spending cuts.
Mr Rajoy's best chance would seem to be with Ciudadanos - because of their shared centre-right, business-friendly politics - but the party has ruled out supporting Mr Rajoy as prime minister, chiefly because of corruption cases in his party.
Ciudadanos leader Albert Rivera said on Monday that his party and the Socialists should abstain in the parliament vote and give the Popular Party a possibility of forming a minority government.
Under the constitution, King Felipe VI will invite a party leader - normally from the party with the most votes - to form a government. The nominee must garner a majority of deputies' votes in parliament in a first round to take office, or the most votes in the second round.
Deputies take their seats by January 13 but there is no time limit on staging the first vote. If the candidate is not immediately successful, parliament has two months to elect a prime minister or call a new election.