Reuters: Market News: Spain's PM denied symbolic austerity boost in local vote

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Spain's PM denied symbolic austerity boost in local vote Mar 25th 2012, 23:22 Sun Mar 25, 2012 7:22pm EDT * People's Party wins most votes, but not a majority * Socialists could ally with United Left to govern Andalucia * Region has over 30 pct unemployment, highly indebted * Andalucia has been in Socialist hands since 1978 By Nigel Davies SEVILLE, Spain, March 26 (Reuters) - Spain's centre-right People's Party won a regional election in Andalucia but did not secure the outright majority it expected, depriving Prime Minister Mariano Rajoy of a symbolic boost to help him push through harsh spending cuts. Rajoy had hoped his PP party would secure a majority in the country's most populous autonomous region, and planned to use it as a mandate to deepen cuts in public spending as he tries to drag Spain out of the euro zone debt crisis. A solid win in Andalucia, known for its olive oil industry and beaches, would have also put the PP in control of 12 of 17 autonomous regions and strengthened Rajoy's hand five days before he presents a tough 2012 budget. But the results from Sunday's vote suggest his party will not be able to govern the region alone since the Socialists could form an alliance with a leftist party to control the legislature. With 99.8 percent of votes counted, the PP had 50 seats in the 109-seat local legislature, the most it has ever won in the region. The Socialists had 47 and the United Left had 12. Opinion polls had forecast the PP would take between 54 and 59 seats as Andalucians tired of three decades of Socialist rule, due to high unemployment and corruption scandals. In April, Rajoy is expected to enact reforms allowing the regions to cut health care and education spending. He commands an absolute majority in the national parliament and will be able to forge ahead with plans for spending cuts to hit a tough public deficit target of 5.3 percent of gross domestic product. The extent of angst over the cuts will be tested on Thursday when Spain sees its first general strike since November 2010. "The vote should not be overinterpreted in the coming days. People are not suddenly shifting and voting against austerity. The PP still won in Andalucia. The mood has not changed for the Socialists and a general strike is not going to change the government's deficit commitments," said Antonio Barroso, political analyst with Eurasia Group. The Socialists were weakened all over Spain in last year's national and local elections as voters punished them for their handling of the economy. Spain is heading into its second recession in three years. "It's a bitter sweet victory for the PP. It would have given them control of 12 of 17 regions, and in all of the main ones except Catalonia, which is committed to austerity anyway," Barroso said. FATIGUE WITH SOCIALIST RULE The United Left - that gained six seats in the local legislature, doubling its presence - hinted that it would consider a coalition with the Socialists, but analysts said tough negotiations lay ahead. "Today we've seen that the majority of voters in Andalucia have not voted for the right. They want change that defends the social model and the equality of opportunities," United Left leader Cayo Lara said on television. "The people of Andalucia want change, but they want change through the left," he said. A dozen Socialist leaders are due to stand trial on accusations that they diverted benefits meant for struggling companies to family and friends. "United Left knows it can either go into an alliance with a government that has been marked by corruption scandals, or with the PP that won more popular backing," said Jose Pablo Ferrandiz, a director at Metroscopia polling agency. He said Metroscopia had forecast outright victory for the PP and had not expected so many votes to go to the United Left. "United Left has the key to the next government, and it will sell it dearly," Ferrandiz said. The smaller northern region of Asturias also held an election on Sunday. As expected, no party got a clear majority, and it was still not clear whether the Socialists or the PP would be able to form an alliance with another party to govern. Spain's regions account for about half of public expenditure and overseeing their spending after years of profligacy will be key to the central government meeting its deficit targets. Andalucia is one of the most indebted regions in the country relative to its output and has the highest jobless rate in Spain, at over 31 percent. It is home to almost a fifth of Spaniards and is reliant on more than 20 million visitors to its cities and beaches each year, as well as agriculture, to ease some of the domestic pain. At least half of Spaniards support some spending cuts to social services as the government tries to avoid needing a bailout like neighbour Portugal. Link this Share this Digg this Email Reprints

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