Mariano Rajoy sworn in as Spain's Prime Minister

Mariano Rajoy has taken the oath of office as Spain’s Prime Ministerto begin forming a new minority government.

Rajoy was sworn in at the royal palace in Madrid on Monday, returning to office after 10 months of political limbo which had caused Spain to grapple with increasing economic uncertainty. The deadlock ended when Rajoy won a confidence vote from lawmakers at the weekend.

The swearing-in ceremony was presided by King Felipe VI. Last week, the monarch asked Rajoy to form a new cabinet after Spain’s Socialists, who had opposed the 61-year-old and his Popular Party(PP)’s return to power, accepted to abstain in the final vote of confidence in parliament and therefore enable Rajoy to form a government with cross-party support.  

However, Rajoy, who will name his conservative cabinet on Thursday, is expected to face an array of challenges, including a weak mandate which would make it hard for him to pass laws in parliament. The most daunting of all tasks would be to find some 5.5 billion euros (USD 6 billion) in cuts or tax hikes to meet targets set by the European creditors.

Observers in the banking sector said Monday that Rajoy would fail to carry out expected reforms in the economy given the massive opposition from the Socialists and other parties. They said Rajoy would be needed to strike deals with a fragmented opposition to pass legislation in the future, something they said could become increasingly difficult.

Rajoy’s sole advantage in the new government would be the widening split among the opposition, which would give him some chance of clinching deals at the expense of keeping Spain away from another political deadlock.

Rajoy and the center-left PP lost their majority in parliament in 2015 after many in Spain began to suspect the party’s ability to weather the country’s economic crisis. Two successive elections then failed to produce a majority government, further dipping Spain into political uncertainty.

The PP has been hit with several corruption scandals while elements inside the party have also vowed to oppose Rajoy’s bid for carrying out reforms. That raises more questions about whether the new government would be able to operate effectively.

After Rajoy won the vote of confidence in the Spanish legislature, thousands staged a protest in Madrid on Saturday to voice anger at his return to power.

The seasoned politician also has to deal with a resurgent Catalan separatism, a thorny issue which he has been grappling with since first coming to power in 2011. Regional leaders have vowed that they would press ahead with a planned independence referendum in 2017 if the central government continues to refuse to hold talks about their demands.