Crisis-hit Spanish voters to cast aside government

20th November 2011, Comments 0 comments

Spain's right romped towards a thumping victory in general elections Sunday, which would complete a clean-sweep rejection of governments in the crisis-torn eurozone nations.

Bowed by a 21.5-percent jobless rate, economic stagnation and deep spending cuts, the 36-million-strong Spanish electorate was set to hand the right a crushing win over the ruling Socialists.

Opposition Popular Party leader Mariano Rajoy has a lead of about 15 percentage points, latest polls showed, sufficient to secure an absolute majority in parliament and a free hand to reform.

Spain would thus become the last of the so-called periphery eurozone nations to ditch its government after the debt storm toppled rulers of Ireland, Portugal, Greece and Italy.

"The choice which Spanish voters make Sunday is of course important for Spain. It is also important for France, for the euro and for Europe," France's leading daily Le Monde said in an edition devoted to Spain published Saturday.

Street protests and a debt market tempest chased the ruling Socialists up to the last moment before the vote.

Though considered uncharismatic even by many of his supporters, the 56-year-old Rajoy has galvanised support by promising a break from the past to fix the economy and create jobs.

Rajoy has given few details of his austerity plans but analysts say Sunday's winner must quickly impose reforms and cut costs to reassure world markets about Spain's determination to repay its debts.

Spain's risk premium -- the extra interest rate investors demand over safe-haven German debt -- shot to a euro-era high of more than 500 basis points in the days ahead of the vote.

"If the markets think the new government is not going to act with the necessary determination, they will raise the risk premium further," said Daniel Pingarron, analyst at trading house IG Markets.

Rajoy has vowed to make cuts "everywhere", except for pensions, so as to meet Spain's target of cutting the public deficit to 4.4 percent of gross domestic product in 2012 from 9.3 percent last year.

"We are going to comply with our deficit obligations," Rajoy said on Friday.

Prime Minister Jose Luis Rodriguez Zapatero's government is blamed for reacting too slowly to the 2008 property bubble collapse, which threw millions of people out of work.

His government enacted austerity measures from last year that bled support, cutting public sector wages by an average 5.0 percent, freezing pensions and raising the retirement age from 65 to 67.

A nationwide protest movement erupted in May to vent anger over the high jobless rate and corrupt politicians, accusing the authorities of favouring big business and banks over ordinary people.

Zapatero, 51, bowed out of the election battle after two terms and nearly eight years in office.

The Socialists' new standard bearer, 60-year-old Alfredo Perez Rubalcaba, has warned voters that the right will cut health and education.

But latest polls show his party is headed for a thrashing.

Whoever wins, and whatever action they take, some analysts say the answer to Spain's problems lies beyond its borders.

Barclays Capital said Spain will likely need the European Central Bank to step up its support.

"Another round of labour market reforms, banking sector restructuring and enhanced fiscal consolidation are the likely priorities for the new government," it said.

"Those policies would undoubtedly be welcomed by markets, yet may not be enough to stabilise the Spanish sovereign. Ultimately, we think it likely that the ECB will need to step up its support."

© 2011 AFP

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