A Catalan separatist party whose support is key to the investiture of Spain's new government on Thursday refused to offer its backing in a blow to Socialist premier Pedro Sanchez.

For Sanchez, securing the endorsement of the Republican Left of Catalonia (ERC), which won 13 seats in Sunday's election, is vital if he is to return to power by means of a majority vote in the 350-seat parliament.

But it is a risky gamble given the ongoing separatist crisis which erupted last month into mass protests after Spain jailed nine Catalan leaders over a failed 2017 independence bid, among them ERC leader Oriol Junqueras.

The ERC's response came after initial talks with the Socialists who on Tuesday unveiled a tentative coalition deal with the radical leftwing Podemos.

"The ERC continues to take a negative position on the eventual investiture of Pedro Sanchez, given that the Socialists gave no indication they would change their repressive stance on the political conflict between Catalonia and the state," it said.

"Without such guarantees, there is no chance the party will reassess its position."

Sanchez called Sunday's election to strengthen his hand after an inconclusive election in April, which the Socialists won but without a majority.

But the gamble ultimately failed and he emerged weakened from a ballot that transformed the far-right Vox into Spain's third largest party.

In an appeal to ERC, Sanchez said a Socialist-Podemos government would be the only option for talks on the Catalan crisis.

Spanish Prime Minister Pedro Sanchez is seeking support from smaller parties for his proposed coalition with the radical leftwing Podemos
Spanish Prime Minister Pedro Sanchez is seeking support from smaller parties for his proposed coalition with the radical leftwing Podemos AFP / GABRIEL BOUYS

"We are the only two parties... which support dialogue within the framework of the constitution to resolve the political crisis in Catalonia," he said Thursday.

"Those who oppose the formation of a progressive government of the Socialists and Podemos, which is the only option... will have to explain what alternative they propose."

Both parties lost seats compared to April, with the Socialists winning 120 seats, down from 123, and Podemos taking 35, compared with 42.

With just 155 seats, they are still 21 short for an investiture vote.

Although Sanchez might have sought support from the centre-right Ciudadanos, which suffered a rout on Sunday, shrinking to 10 seats from 57, the party has stonewalled over talks, forcing him to turn to the Catalan separatist parties.

ERC is more moderate than its separatist rival JxCAT (Together for Catalonia), the party of former Catalan president Carles Puigdemont who fled Spain in 2017 to avoid prosecution for the failed independence bid.

Last month's verdict against the Catalan separatists unleashed a wave of often-violent protest, with images of masked protesters battling police ultimately playing into the hands of the far-right.

With Puigdemont absent from the trial, ERC's Junqueras took the fall, with the court handing him the heaviest sentence of 13 years behind bars.