Spanish Prime Minister Pedro Sanchez's has called a snap national election to be held on April 28.
Sanchez was forced to disband the minority government and call the election on Friday after its budget proposal was turned down on Wednesday.
He was unable to get the support of either of the two major Catalan nationalist parties, eventually leading to the decline of the proposal.
"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," Sanchez said following the announcement.
"I have proposed to dissolve parliament and call elections for 28 April," he added.
The election is Spain's third in less than four years, reflecting an increasingly fragmented political landscape.
Sanchez's socialist government took power eights months ago and has since been dependent on the votes of small regional parties to pass legislation.
His luck ran out last Wednesday, when two major Catalan nationalist parties, the Republican Left of Catalonia and the Catalan European Democratic Party, announced they would not vote for the budget.
It is unclear if an election will solve Spain's political issues.
Polls show no party will get a majority, pointing to lengthy negotiations between possible coalition partners, potentially including the far-right Vox.
The conservative's People Party (PP) and centre-right Ciudadanos would not be far behind Sanchez's PSOE (Socialist Workers' Party), and could theoretically form a coalition with Vox, as they did in the Andalusia region in December.
One of the main issues during the upcoming campaign will be Catalonia's drive for independence.
PP, Ciudadanos and Vox will all try to get the votes of those that oppose an independent Catalonia.
Friday's announcement comes less than a week after thousands of Spaniards took to the streets to call for the end of the government and demanded that Catalan separatist leaders be put in prison.
Many right-leaning Spaniards were alarmed by the willingness of the PSOE to negotiate with Catalan nationalist parties on regional self-determination before the high-profile trial of 12 Catalan leaders accused of rebellion, embezzlement and disobedience in relation to Catalonia's failed 2017 independence bid.
Following that demonstration, Sanchez said he "respected" the demonstrators during a speech in the north of Spain, but said the PSOE-led government would continue supporting "coexistence, law and dialogue in Catalonia".
