Conservative landslide

Spain's incoming Prime Minister Mariano Rajoy had little time to celebrate his party's landslide election victory on Monday before coming under immediate pressure from nervous financial markets.

The yield on Spanish 10-year bonds rose in early trading and stocks in Madrid dropped almost 2 percent despite the near certainty that there would be a change of government. At 6.5 percent, Spain's yields crept ever closer to the 7 percent level which forced other eurozone economies to seek bailouts.

The conservative People's Party (PP) won a crushing victory over its incumbent Socialist opponents on Sunday, taking 44.6 percent of the vote and an absolute majority of 186 seats in the 350-seat lower house.

The outgoing Socialists of Prime Minister Jose Luis Rodriguez Zapatero secured only 28.7 percent of the vote as voters punished the government amid the country's worst economic crisis in decades.

Tough economic policy

Rajoy now faces pressure to take immediate action to ward off the need for a bailout. The daily El Pais newspaper joined analysts in urging the incoming prime minister to clarify economic policies outlined in his election program and to appoint an economy minister as soon as possible.

Saenz de Santamaria, a member of Rajoy's People's Party, also called for the formalities of transferring powers to a new government to be accelerated in Spain's "unusual" situation.

With Spain's budget deficit standing at 9.2 percent of gross domestic product, other eurozone nations will expect Rajoy to take a tough line and impose unpopular spending cuts. German Chancellor Angela Merkel has reportedly already telephoned Rajoy to offer her cooperation in overcoming Spain's economic crisis.

But the prime minister in-waiting warned on Sunday evening against expecting "miracles" and said that he would govern "for all."

"It is no secret to anyone that we are going to rule in the most delicate circumstances Spain has faced in 30 years," he said. "For me, there will be no enemies but unemployment, the deficit, excessive debt, economic stagnation and anything else that keeps our country in these critical circumstances."

Spain is the fifth eurozone member to have kicked out its government over its handling of the crisis. Individual efforts by new governments in Italy, Greece, Portugal and Ireland, however, have so far done little boost market sentiment.

Ruling party concedes defeat

While the PP enjoyed its best-ever result on Sunday, the Socialist PSOE party suffered its worst share of the vote since elections began in the post-Franco era.

Alfredo Perez Rubalcaba, the Socialist's candidate for prime minister, conceded defeat late on Sunday. "The Socialist party did not have a good result. We clearly lost the elections," he said.

Outgoing Prime Minister Jose Luis Rodriguez Zapatero had called early elections, saying he wanted to give a new government the chance to confront Spain's economic woes. He announced prior to the vote that he would not be standing for re-election.

In one surprise, a new pro-independence Basque coalition, Amaiur, won seven lower-house seats, meaning it now outnumbers the Basque region's traditionally strongest party, the moderate Basque Nationalist Party.

Author: Charlotte Chelsom-Pill, Mark Hallam (Reuters, AFP, AP, dpa)
Editor: Michael Lawton