Spain's Dilemma

Public opinion polls suggest a win by Spain's incumbent Socialist Party led by Prime Minister Jose Luis Rodriguez Zapatero although by a margin that would leave them short of an absolute majority.

The killing of a former Socialist councillor in the Basque Country has cast a heavy pall on Sunday's voting. The Socialist government and conservative opposition have blamed Basque guerrillas of ETA for Friday's shooting of Isaias Carrasco who was assassinated in front of his wife and young daughter outside his house in a small town near the Basque coastal city of San Sebastian.

Zapatero has said the shooting was an attempt by ETA to interfere with the elections.

"But Spanish democracy has demonstrated that it does not allow challenges from those who oppose its basic principles and its most essential values," he said.

Murder reminiscent of Madrid bombings

The timing of the latest killing has stirred memories of an election-eve massacre by Islamic militants who killed 191 people in a string of bombings against commuter trains in Madrid in March 2004.

At the time, the conservative People's Party (PP) led by then Prime Minister Jose Maria Aznar seemed almost certain to win for the third consecutive term during the last national elections in 2004.

But anger at the conservative government's attempts to blame those bombings on ETA, despite mounting evidence that it was the work of Islamists, helped opposition leader Zapatero to come from behind to win the elections. Many voters felt Spain was attacked because of the conservative government's alliance with the United States in fighting in Iraq and accused Aznar of deliberately misleading them.

The latest murder is not expected by many to have a huge impact on the vote both of its small scale and the fact that the two main parties hold relatively similar positions on not negotiating with ETA.

ETA has killed 820 people in Spain during the past four decades in an attempt to gain independence for the Basque region in northern Spain. Opinion polls show that while many Basques are unhappy with their current status as an autonomous region, most don't want complete independence from Spain. And only a small fraction support ETA.

Zapatero had made the controversial move of launching peace talks with ETA before abandoning them in December 2006 after ETA killed two people with a car bomb. He has been repeatedly slammed by the PP for negotiating with ETA.

In statement read on television Friday, Mariano Rajoy of the conservative PP urged Spaniards to "be united against ETA," which should now lose "all hope of achieving its political objectives."

This time, voters remain more worried about the cooling economy as Spaniards struggle with rising unemployment, currently at 2.3 million.

Economy remains the key

Spain's economy has had among the fastest growth rates in Europe during recent years, with 500,000 jobs created annually.

Yet indications show that the country's building boom is coming to an end and growth slowed to 3.8 percent in 2007. While the government has a surplus to fall back on, many Spaniards, fearing an economic crisis, have put off purchases. That in turn has caused retail sales and industrial production to taper off.

The job market has shown signs of shrinking, food prices have increased and growth could sink as low as 2 percent in 2008.

Yet many voters find the economic plans of the ruling Socialist Party, led by Jose Luis Rodrigo Zapatero, and his center-right challenger, Mariano Rajoy of the PP to be nearly indistinguishable.

Bitter, populist campaign

A bitterly fought campaign marked by nasty personal attacks between the ruling Socialist Party and the PP has turned off many voters. During their last televised debate, Zapatero and Rajoy clashed over anti- terrorism policy, immigration and the outlook for the Spanish economy, continuously called each other "liars."

Populist rhetoric has dominated the campaign, with the Socialists pledging social spending and the PP promising to make immigrants respect Spanish customs and to fight juvenile crime.

Rajoy has confronted Zapatero's decision to offer residence permits to more than half a million illegal immigrants who were working in Spain when he came to power. Rajoy said the influx of foreigners was leaving many poorer Spaniards worse off and jeopardizing public security. He pledged to expel any immigrant convicted of a crime.

The parties have also fallen over themselves promising lower taxes, higher pensions, free dental care and cheaper mortgages.

Both parties need to win not only the support of swing voters but also motivate their supporters to go to the polls in large numbers in order to win the elections.

With the parties close, the winner could have to rely on the support of smaller parties to form a government. Zapatero has been in a thorny alliance with the separatist Republican Left of Catalonia (ERC) and the United Left, a coalition of Greens and communists.

Parties far apart on social issues

In a very close race, voters will likely take a look at the differences between social issues, experts say. Zapatero's government pushed through fast-track divorces, legalized gay marriage and adoption, granted amnesty to many illegal immigrants and ended compulsory religious education in schools.

The People's Party fiercely opposed these initiatives, although it has been reluctant to make a big deal about them in the campaign, worried that doing so could backfire with swing voters.