Mariano Rajoy and his People’s Party won the biggest majority in a Spanish election in almost 30 years on Sunday, sweeping the ruling Socialists from power after eight years and winning an absolute majority in Parliament, with 186 of 350 seats.
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Socialist candidate Alfredo Perez Rubalcaba won 110 seats, while the rest were distributed among smaller parties, which increased their share of the vote, giving the Socialists their worst result in three decades.
Rajoy’s victory was no surprise, but his winning an absolute majority means his party will be able to push through legislation without the support of any other politicians.
Rajoy and the People’s Party have won a mandate to slash the budget deficit through heavy-handed austerity measures. At 23%, Spain has the highest unemployment rate in the European Union, something Rajoy hopes to correct, though he’s given no details of his proposals.
“Rajoy will have no option but to announce a package of extraordinarily tough reforms to convince the markets and his European partners Spain is different from Italy and Greece,” said Jose Antonio Sanahuja, a professor of international relations at Madrid’s Complutense University.
Rajoy won’t take office for a month, prompting him to say on November 18, two days before he was elected, that he hoped Spain wouldn’t need a bailout before he’s sworn in.
Ministers won’t be appointed until December 21, and Spanish law doesn’t allow Parliament to resume until any sooner than December 13. Senior members of the People’s Party meet today at 5 p.m. in Madrid. Miguel Arias Canete, head of the PP’s electoral committee and a former minister, said today that markets will have to give the party time.
“We need to be very convincing during these days and hope that they give us the breathing space to be able to put in place the necessary measures,” Canete told Es Radio.
However, Spain’s 10-year bond yield continued to rise today despite the election, climbing from 6.379% on November 18 to 6.538%. Spain’s Ibex 35 stock index was down 2.256% today as of 1:40 p.m. local time.
Rajoy pledged after the results last night that Spain would “stop being a problem and become part of the solution again,” but added that, “there won’t be miracles, we haven’t promised any.” Most analysts believe Rajoy won’t be able to make a big differnece without bolder steps from the European union and European Central Bank to contain the debt crisis.
“We consider swift implementation of structural and fiscal policies as a necessary but possibly insufficient condition for the Spanish sovereign bond market to stabilize,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “We still see little practical alternative to a strengthened commitment by the ECB to act as lender of last resort.”
Rajoy has pledged to cut the deficit by a third to 4.4% of GDP next year as he fights to remain in the euro. Rajoy has said he plans to do so by cutting “superfluous spending,” though he’s made no mention of what that might be. He also intends to overhaul the financial system, but has not said how. He has pledged to maintain the purchasing power of pensions, which accounted for 112 billion euros this year, but said all other spending can be trimmed.