(Bloomberg) -- After six years in office, Spanish Prime Minister Pedro Sanchez is blindsiding executives and investors with policy surprises in the euro area’s most successful major economy.

The Socialist leader on Saturday pushed out the long-standing executive chairman and chief executive officer of Telefonica SA, Spain’s main telecommunications provider. On Sunday, he stiffened his effort to shut many foreign buyers out of Spain’s property market. 

Sanchez is set to arrive at the World Economic Forum in Davos, Switzerland, on Tuesday to make his pitch to the global business elite — buoyed by what’s projected to be the euro area’s fastest-growing big economy for a fourth straight year in 2025. 

One of a dwindled number of left-leaning leaders in Europe, Sanchez, 52, is portraying himself as a counterbalance to those aligned with Donald Trump. Yet he’s in a tight spot politically. 

Sanchez’s minority coalition has been fragile since its inception in 2023 and the prime minister suffered another setback last week when a Catalan nationalist group withdrew its support, essentially ending his chances of passing a budget for this year. That has fueled speculation that the premier is rolling the dice on his relationship with business to shore up support among his base.

One reason for Sanchez’s move against Telefonica’s Jose Maria Alvarez-Pallete was his frustration with the company for using its publicity budget to advertise in right-wing news outlets, according to people familiar with the matter. The company also advertises in left-leaning media. 

Sanchez and his team also view Pallete — the first Telefonica chairman who wasn’t a political appointee — as lacking industrial ambition for Telefonica and believe he didn’t focus enough on technological innovation, according to the people. 

Telefonica shares fell as much as 4.3% in Madrid on Monday, making it the worst performer of the Ibex-35 and Stoxx 600 Telecom index.

A government spokesman said Pallete, who had been executive chairman since 2016, was replaced because a revised shareholder structure at Telefonica requires new leadership. Telefonica declined to comment. 

The former state-owned monopoly, Spain’s largest company by market value at the start of the century, has dropped out of the top 10, weighed down by leverage, divestments and a drop in its share price. 

The government’s efforts to shield Spanish real estate from foreigners also plays into a hot-button issue, with voters across the country frustrated at the spiraling price of homes. A new-housing shortage, a lack of permits to develop land for construction and rising property and rental prices have fueled discontent. 

At a Socialist party event on Sunday, Sanchez said he’ll propose prohibiting non-European Union citizens who live outside the EU from buying houses in Spain — a step further from his Jan. 13 announcement that he’d tax such transactions at the equivalent of 100% of the property value. 

The Telefonica power grab began Friday with the government telling Pallete to step down. He resigned the next day and was replaced by Marc Murtra, until now chairman of defense company and IT company Indra Sistemas SA, in which the government holds a 28% stake. He’s a former Socialist official who’s close to Sanchez. 

A merger between Indra and Telefonica’s IT units was discussed several times in the past, though it was opposed in part by Pallete. 

Opening the door to the switch was the Spanish government’s acquisition of 10% of Telefonica last year to safeguard its influence after Saudi Telecom Co. said it was taking a 9.9% stake. 

Criteria Caixa SA, Spain’s largest industrial holding firm, later raised its Telefonica stake to 10% and signaled it would be a partner to the government.

“It’s now clear that the government’s decision to invest in Telefonica was not purely an economic one but rather a political decision to control one of the country’s largest companies,” said Alfonso Benito, chief investment officer at asset manager Dunas Capital. The firm doesn’t invest in Telefonica due to political influence, Benito said.

Murtra’s arrival at Telefonica may raise concern about escalating political influence at Telefonica, Bloomberg Intelligence analysts Erhan Gurses and Matthew Bloxham wrote in a note on Sunday. 

“Some may argue the appointment appeared to lack a thorough selection process that would be apt for a large multinational company,” Gurses said in separate comments.

--With assistance from Macarena Muñoz.

(Updates with shares in eighth paragraph.)

©2025 Bloomberg L.P.