Spain’s King Felipe VI has asked Socialist Party (PSOE) leader Pedro Sánchez to form a government and try to resolve the political stalemate following last December’s inconclusive election. Last week, the European Commission also made its concerns known about the economic consequences of the failure to form a Spanish government, saying it “could slow down the agenda of reforms and trigger a loss of confidence and a decline in market sentiment.”

The election result shattered Spain’s decades-old two-party system and produced a hung parliament, in which no party has the required 176 seats for a majority government. The ruling Popular Party (PP) slumped to 123 seats, the PSOE had its worst ever result with 90 seats, as did the Stalinist-led United Left (IU), which was reduced to just two deputies. Podemos and the right-wing Citizens, both new parties that had not contested a national election before, gained 69 seats and 40 seats respectively. Various regional nationalist parties won 25 seats.

Sánchez was asked to form a government after outgoing PP Prime Minister Mariano Rajoy said he had been unable to get the necessary support for a majority in Congress. He explained that a coalition government between the PP, PSOE and Citizens would have been preferable but claimed the PSOE had refused to take part in “dialogue”. He made it clear he was not stepping down as caretaker PM in the hope that Sánchez fails.

For his part, Sánchez declared that he wanted “a government of change, one that is progressive and that will introduce reforms”. He said Rajoy should “abandon hope” of reaching a power-sharing agreement, and “we aren’t going to back him.”

The King’s offer to Sánchez offers no clear way out of political deadlock and could prove to be a poisoned chalice for the PSOE itself. It is bitterly divided over whether to attempt to form an alliance with the Podemos party, an ally of the pro-austerity Syriza government in Greece, or an openly right-wing government with the PP and Citizens. If Sánchez is unable to form a government, new elections will have to be called that polls suggest could result in the PSOE being displaced by Podemos as Spain’s second party.

Neither PSOE strategy would offer anything to the working class except continued attacks on its social and democratic rights.

Sánchez represents a section of the bourgeoisie that is looking to bring in younger, fresher faces to continue with austerity in Spain, as Syriza has in Greece and the Left Bloc in Portugal. To that end, Sánchez is attempting to form an alliance with Podemos, which is eagerly offering its services, having dropped a key demand to which the PSOE objected—an independence referendum in Catalonia.

Podemos leader Pablo Iglesias has put pressure on Sánchez pointing out that his party won 20.7 percent of the popular vote (5,189,463) in the election, just short of the PSOE’s 22 percent (5,530,779). Polls indicate that a majority of PSOE supporters prefer a pact with Podemos rather than the PP. Iglesias has called on Sánchez to take the post of prime minister, appoint him deputy prime minister and give Podemos half the ministries in a coalition government.

At last weekend’s meeting of the PSOE’s federal committee, Sánchez’s overtures to Podemos were supported by some regional government leaders installed after last May’s regional elections, thanks to Podemos’ support. Francina Armengol, PSOE Prime Minister of the Balearic Islands regional coalition government that includes Podemos, the IU and Greens, told the meeting that there was nothing to fear from these parties.

Aware of the PSOE membership’s opposition to any deal with the PP, Sánchez called for members to be given a vote on any agreement with other parties and that the federal committee should take their views into account before making a final decision. “Any agreement that we get will have all possible guarantees so it will be subject to the federal committee’s approval as well as a consultation to the members,” Sanchez said.

However, most of the regional Prime Ministers led by Susana Díaz, the prime minister of Andalusia, which has the largest PSOE membership, opposed Sánchez: “On December 20, the Socialist Party did not make history. It got the worse result in its history. It’s true that the political map has changed, but we did not manage to beat a party responsible for the biggest inequality gap between citizens and surely the most serious corruption cases we have known in this country. If the Popular Party beat us at the election in those circumstances, we were not on the right path.”

The prime minister of Asturias, Javier Fernández, warned that Podemos is “Someone who is proposing a mutiny, a grassroots mutiny against the leadership. Someone who is attacking us not for what we do but for what we are.”

Such remarks echoed those of former PSOE Prime Minister Felipe González, who remains the leading figure in the PSOE. Interviewed by El Pa í s last Sunday, González condemned an alliance with Podemos claiming it would “liquidate our democratic framework of coexistence, and while they’re at it, liquidate the Socialists as well.”

González acknowledged the breakdown of the political system built by the Spanish ruling class since the transition from the fascist rule of Francisco Franco, nearly 40 years ago: “For some time now, the system born out of the Transition and the 1978 Constitution has been showing signs of wear…the system needs reform and regeneration. But existing attitudes based on either doing nothing [the PP] or on liquidating the entire system [Podemos] are giving us very little leeway for the kinds of reforms that are increasingly necessary.”

González’s presentation of Podemos as an insurgent force seeking to liquidate the political system and the PSOE leadership is absurd. Podemos is seeking only to give a mild “left” cover to continued austerity and support for war, as the Syriza government has done in Greece, where Prime Minister Alexis Tsipras has liquidated neither the capitalist state nor the Pasok social democrats.

Rather, González is seeking to falsely build up Podemos’ “revolutionary” credentials in order to justify orienting the PSOE towards an alliance with the bourgeois right.

González said he was opposed to a grand coalition between the PP, PSOE and Citizens because it would put a “squeeze” on the PSOE that would benefit Podemos. He cynically suggested the PSOE should make a pact with Citizens to pass “the reforms that we need” and called on the PP not to block in Congress—that is, hiding a direct alliance between the PSOE and the PP behind the façade of a minority PSOE-Citizens government.

To put pressure on Sánchez to negotiate such a deal, the federal committee agreed to stage a leadership election on May 8, just two years after the last one.