CIUDADANOS have agreed to enter a political pact with the Socialist PSOE.
Albert Rivera’s centre-right party will back the left-wing Pedro Sanchez’s bid to be Spain’s new prime minister.
The decision marks a change of strategy for Rivera who had said his party would abstain from the March 2 vote to install Sanchez as leader.
Ciudadanos have said they will now ask Mariano Rajoy’s PP to abstain at the vote in order to allow Sanchez to become prime minister.
PSOE and Ciudadanos won a combined 130 seats in December’s general election, short of the 176 needed for an overall majority.
“We can’t do all this alone,” said Rivera.
“We need more parties. Here is the basis for a new political era. The problem is not arithmetic, it is generosity and dialogue.
“I invite you to join a new transition.”
Podemos, who came third in the election with 69 seats, have ruled out entering a coalition with Ciudadanos and the PSOE.
Ciudadanos have said they will vote against Sanchez at the investiture if he enters a deal with Pablo Iglesias’s party.
A five-point plan for constitutional reform lies behind today’s agreement between Sanchez and Rivera.
It includes depoliticising the judiciary, stripping central government representation from regional administrations and cutting prime ministers’ terms to two.
Other measures agreed on include an increase in the minimum wage, a tax on wealthy estates and reform of corporation tax.
Sanchez will now try to secure an absolute majority in the investiture vote on March 2.
If the PSOE leader cannot receive the necessary backing the PP may be asked once more to form a government.
Should these attempts all fail, Spain will go to the polls once more in June.