Spain set for early general elections in November

29th July 2011, Comments 0 comments

Spain's Prime Minister Jose Luis Rodriguez Zapatero Friday called general elections for November 20, four months early, insisting the country's battered economy was on the road to recovery.

"The course is set. So I am announcing a timetable for elections, which will be held on November 20," Zapatero told a news conference.

The announcement came as Moody's threatened to downgrade the country's debt rating and official data showed the jobless rate remained the highest in the industrialised world in the second quarter.

But the Socialist leader, in power since 2004, remained upbeat about the economy.

"In a very complicated context, the economy is showing positive signs... We have put in place the bases for the recovery," he said.

"For this reason, it is the moment to announce a timetable for the next general elections."

The collapse of the property bubble in 2008 and the global financial meltdown plunged the country into recession in late 2008 and sent unemployment soaring. The economy stabilised in 2010 and has shown slow growth in early 2011.

Zapatero announced in April that he will not seek a third term as Socialist leader in the next elections.

The party chose Alfredo Perez Rubalcaba, then interior minister and a party heavyweight, to replace him.

Rubalcaba, who turned 60 on Thursday, promised to tackle crippling unemployment and to listen to "the street" when he officially took charge of the ruling party earlier this month.

The government does not have to go to the country before March 2012.

But since the Socialist Party was crushed in local and regional elections in May, the opposition Popular Party has pressed the government to call the polls early.

Some senior Socialist Party members appeared to agree, Spanish newspapers El Pais and El Mundo said on their websites.

"Zapatero seems to have finally given in to the wishes of the party and the Socialist candidate, Alfredo Perez Rubalcaba, and decided to move up the general elections to November."

PP leader Mariano Rajoy welcomed Zapatero's announcement.

"This is good news because it's what most Spaniards want," he told a news conference. The elections will provide "the necessary impetus for Spain to emerge from the crisis that we are in."

One analyst, Holger Schmieding, chief economist at Berenger Bank, said the election "adds an extra element of near-term uncertainty" to the economy.

"But in the longer run, the result could be positive. A fresh government with a fresh mandate could strengthen rather than weaken the reform momentum in Spain," he said in a research note.

In the May elections, a huge swathe of the electorate, furious over Spain's economic crisis and soaring unemployment, abandoned the Socialists for the PP, which is expected to romp into office after eight years in opposition.

But an opinion poll this week indicated that the Socialists have cut the opposition's lead to 7.1 points from 10.4 points since Rubalcaba was named.

PP members have also been embroiled in a corruption scandal that led to the resignation last week of Francisco Camps as head of the eastern Valencia region's autonomous government.

The election announcement came as Moody's warned it planned to downgrade the country's credit rating, currently at "Aa2", that of four major banks and six of the country's 17 regions.

Spain, with an economy the size of those of Greece, Ireland and Portugal combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue programmes.

But it continues to suffer from the risk of contagion from the crisis.

Moody's said that the pressure on Madrid could be exacerbated by fears over the new European deal to rescue Greece, which had "created a precedent" by involving the private sector and signalled a growing risk for investors holding bonds in the fragile countries of the eurozone.

Antonio Garcia Pascual, an analyst with Barclays Capital Research, said Moody's threats are "likely to have a negative impact on the funding conditions of Spanish credit institutions."

Also Friday, official data showed that unemployment had eased in the second quarter, to 20.89 percent from 21.29, but remained the highest in the European Union and in the countries of the Organisation for Economic Cooperation and Development (OECD).

"We still have a high unemployment rate... but the data published today shows a certain change in tendency," which "will continue in the coming months," said Zapatero.

© 2011 AFP

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