Socialist Prime Minister Pedro Sanchez announced his decision to call a new general election after a tense meeting with his Cabinet in a bid to put an end to the deadlock gripping the Spanish Parliament. The choice to hold a snap vote on April 28 followed a crisis sparked when the Government's budget plan was voted down earlier this week by two Catalan separatist parties who had always supported the leading coalition. Mr Sanchez said a televised address to the nation: "Between doing nothing and continuing without the budget and calling on Spaniards to have their say, I choose the second.

"Spain needs to keep advancing, progressing with tolerance, respect, moderation and common sense.

"I have proposed to dissolve parliament and call elections for April 28th."

Mr Sanchez took office in June after his predecessor, Mariano Rajoy, lost a vote of confidence.

The rejection of Mr Sanchez's budget by separatists ERC and PDeCAT parties came as a surprise, as the Catalan movements didn't raise any concerns about the draft proposals ahead of the vote.

The budget plan aimed at increasing spending to address some of the country's long-standing financial inequalities, fuelled by the 2008 financial crisis from which the country hasn't yet fully recovered.

The lack of support on the budget law has been seen as a lack of confidence in Mr Sanchez, who needs the support of both Basque and Catalan nationalist parties, holding 84 seats in Parliament.

Pablo Simon, a political science professor at Madrid's Carlos III University, told CNBC: "Sanchez has not passed the budget by himself.

"It makes sense as consequence to assume that he does not have a workable majority in Parliament."

The elections won't produce a single winner, according to opinion polls, forcing parties to form a Government coalition.

Mr Sanchez's Socialists are leading the race in surveys, with estimates from the last few months averaging at 24 percent, according to a poll of polls by daily El Pais.

But the conservative's People Party (PP) and centre-right Ciudadanos would not be far behind and could theoretically form a coalition with far-right Vox, as they did in the Andalusia region in December.

However, it is unlikely the Ciudadanos will accept an alliance with the far-right at a national level, which may lead the party to seek a three-way alliance with the Socialists and anti-austerity Podemos.

The outcome of the vote on the budget didn't only spark a fresh political crisis in Madrid, but also represented a rarity in the Spanish political landscape.

The Wednesday's vote in the Spanish Parliament, where 191 parliamentarians out of 350 voted against the budget, marked the second time a Spanish Government lost a vote on the budget since 1979.