King Philip VI of Spain has announced that in the four months since the last elections, the elected members of parliament, and especially those representing the four main parties, were unable to make an agreement that would produce a viable government. He therefore announced new elections for June 26, 2016.

Spain, like governments in west European parliamentary systems, has long had two main parties: the conservative Partido Popular (PP) and the social-democratic PSOE. They have been alternating in parliamentary majorities since the end of the Franco regime and sometimes they formed a coalition government. As in most such systems, other parties were essentially insignificant by-standers that could get at most a few concessions for their political objectives.

The last elections in Spain changed everything. A new party, Podemos (We Can), which had grown out of the oppositional street movement, the Indignados, emerged with a substantial number of elected deputies on an anti-austerity platform. This program was primarily aimed at the PP, the party in power, and its leader, Mariano Rajoy, which had been an unrelenting supporter of the neoliberal program imposed by outside lenders on the government.

There was a second new party that emerged with a smaller but still significant number of deputies. Its name was Ciudadanos (Citizens). It campaigned against the PP as well, but on the grounds of corruption, and espoused a centrist program.

The king initially asked the PP, as the party with the largest number of elected deputies (but with a smaller number than previously when it had had an outright majority) to try to form a government. After a short while, Rajoy recognized that none of the three other parties was willing to join in a government with the PP and informed the king that he was unable to form a government with a parliamentary majority.

The king then turned to the PSOE as the party with the second-largest number of deputies (but also with a smaller number than previously) to try to form a government. The leader of the PSOE, Pedro Sanchez, sought to create a coalition of PSOE, Podemos, and Ciudadanos whose combined votes were enough to create a majority. He acquired the agreement of Ciudadanos, but Podemos was not at all ready to join such a coalition.

The leader of Podemos, Pablo Iglesias, posed three conditions for entering a PSOE-led government. Number one was the appointment of Iglesias as deputy prime minister along with four key cabinet posts for Podemos deputies. Number two was support for a referendum on independence in Catalonia. And number three was the exclusion of Ciudadanos on the grounds that they were strongly opposed to holding such a referendum and supported the PP's hard line on such referenda.

The PSOE rejected all three conditions, essentially because they were close to Ciudadanos on its positions, and saw the demands of Podemos as a move to replace it soon thereafter as the second, if not the first, party in parliament. In the face of the firm no of the PSOE, Podemos had to decide whether to vote for the PSOE government even if not a member or to vote against it. The question really was whether Podemos as a movement would seek power through parliament or through street action.

Iglesias was in favor of the first but knew he risked being ousted within his own party if he used his majority among the Podemos deputies to give passive support to a PSOE government. So he threw the question to the individual members of Podemos in an internal referendum, and the vote came out as a literal tie. Iglesias then announced that Podemos would vote against the PSOE proposal in its second try. The king, having made May 2 as a deadline for the whole process, called for a new election.

There were three side battles going on at the same time. One concerned Izquierda Unida (United Left or IU) and its relation with Podemos. IU was a coalition of Marxist and Green parties that had been active in the Indignados movement, within which it tended to clash with the more populist groups that later became Podemos. At a local level, IU had been ready to form coalitions with the PSOE. But now they have indicated that they might join forces with Podemos in the next parliamentary elections, which would strengthen the chances of Podemos.

The second was occurring within Catalonia. There were two main coalitions in the regional elections that favored a referendum. One was the politically centrist Junts pel Si (United for the Yes-vote), led by the outgoing regional president Artur Mas. The other was a left coalition called Candidatura d'Unitat Popular (CUP). The CUP made as a condition of its support to Junts in the regional parliament that Artur Mas step down, which he finally did. A compromise candidate was a little-known Carlos Puigdemont whose party was part of the Junts grouping. He promised to hold the referendum within eighteen months, thus forcing a showdown with the Spanish government, or at least with the PP and the PSOE, both considering such a referendum illegal.

The third side event by accidental timing was the developments in the Basque country. For decades there has been a movement ETA seeking independence by armed conflict. There was always a party sympathetic to ETA which sought to operate legally. The Spanish government regularly outlawed such parties. The leader of one of them, Arnaldo Otegi, just at this moment finished a term in prison and was released. He is the head of Sortu, the latest version of a party operating legally. He was received as a hero in the Basque country, to the dismay of the Spanish government.

Otegi indicated that ETA might agree to end its armed uprising if there was some indication of willingness by the Spanish government to accede to a Basque autonomous government. He said somewhat bitterly that the PP and Rajoy had not been willing to move an inch. Of course, to the PP, Basque autonomy was even worse than Catalonian autonomy. And concessions now could feed support in Catalonia for the independence referendum. The PSOE was further embarrassed by this development.

So what may we conclude? Three things, possibly. The first is a question about the possibility of real success of populist anti-austerity movements. Podemos in many ways had modeled itself on Greece's Syriza, and the difficulties the latter has been having has raised questions in Spain and elsewhere as to the consequences of such a movement, pursuing a parliamentary path.

The second is whether it is really possible for states to resist decentralizing pressures of ethno-national movements. For example, in Great Britain today, as it debates British withdrawal from the European Union, everyone is aware of the consequences of so-called Brexit for Scotland's movement for further decentralization and eventual independence.

And thirdly, is there any way that any government is able to maintain an anti-austerity policy in the middle run, amidst the pressures that reduced government real revenues are imposing on states throughout the world?

Spain is in economic terms far more important for Europe and the world than Greece. As this drama plays out in Spain, the world will be watching, reacting, and drawing lessons.

- Immanuel Wallerstein, Senior Research Scholar at Yale University, is the author of The Decline of American Power: The U.S. in a Chaotic World (New Press).

Copyright ©2016 Immanuel Wallerstein – used by permission of Agence Global