June 7 (Bloomberg) -- German Chancellor Angela Merkel and French President Nicolas Sarkozy led pro-business parties in defeating socialists in European Parliament elections, lessening the pressure for more stimulus measures to fight the deepest recession since World War II.

Amid signs the economic slump is bottoming out, the continent’s top two leaders escaped the drubbing in European Union-wide elections that was handed to U.K. Prime Minister Gordon Brown and socialists in smaller countries including Spain, Austria, Portugal, Hungary, Bulgaria and Slovenia.

Merkel’s Christian Democrats and allied Christian Social Union racked up 38 percent of the German vote, beating the rival Social Democrats with 20.8 percent, according to preliminary results. Sarkozy’s Union for a Popular Movement scored 28 percent, beating the Socialists with 16.8 percent.

“It’s a very successful election for Merkel,” said Jan Techau, an analyst at the Berlin-based German Council on Foreign Relations. “Maybe it’s a sign that pressure will ease regarding demands for more social spending to counter the economic crisis.”

Overall, the center-right group known as the European People’s Party remained the strongest in the Parliament, with 263 to 273 out of the total 736 seats, according to an initial projection. The Socialists won 155 to 165 seats and the Liberal Democrats 78 to 84.

“It is a very sad night for Social Democrats in Europe, we’re very disappointed, we had hoped for better results,” Martin Schulz of Germany, the socialists’ floor leader, said. “It’s a very bitter evening.”

British Voters

In Britain, voters were set to deal a rebuke to Brown, battling to hang on to power after the resignation of six cabinet ministers in a week. Brown’s Labour Party braced for a “terrible” outcome, Wales Secretary Peter Hain said on Sky News.

France’s Socialists blamed internal disarray for their defeat. “We’re not yet credible,” Socialist leader Martine Aubry said. “Our Socialist Party has suffered from internal battles and divisions.”

Protest voters made their voices heard in smaller countries, with anti-immigrant parties picking up 17 percent in the Netherlands, 13 percent in Austria and 10 percent in Finland.

The campaigns “have been very national in character. they’ve been fought quite largely on domestic issues and the domestic economic situation,” said Joseph Curtin, a senior researcher at the Institute of International and European Affairs in Dublin.

About 9,000 candidates ran for seats in the Parliament, which passes EU-wide laws on everything from consumer safety to financial services, approves the bloc’s 116 billion-euro ($165 billion) budget and vets top appointments.

First elected by popular ballot in 1979, the Parliament has gained authority over a widening area of regulation. Still, its lack of powers over taxes, spending and foreign policy render it invisible to most voters.

Turnout

EU-wide turnout fell to 43 percent, the lowest ever, from 45.5 percent in 2004, according to a first official estimate. Turnout has dropped in every EU election from the peak of 62 percent in 1979.

The center-right’s victory boosts the odds that Jose Barroso will win a second term at the helm of the European Commission, the bloc’s executive arm. EU leaders may reappoint Barroso at a June 18-19 summit in Brussels, a step that requires the Parliament’s approval.

Italian Prime Minister Silvio Berlusconi’s allies shared in the center-right’s gains, snaring 39 percent to 43 percent, with the opposition at 27 percent to 31 percent, according to an IPR Marketing survey cited by the Ansa news agency.

In Germany, a repeat of today’s voting in the national election on Sept. 27 may enable Merkel to stay in power, forming a coalition with the pro-business Free Democrats instead of the Social Democrats, her party’s historic rival with whom she currently rules.

Obama’s Pleas

Merkel resisted President Barack Obama’s pleas for additional pump-priming measures, criticized the European Central Bank for buying assets, and was the first to reflect publicly on rolling back the stimulus.

Stimulus measures in 2009 amount to 1.6 percent of gross domestic product in Germany, 1.4 percent in Britain, 0.7 percent in France and 0.2 percent in Italy -- all short of a target of 2 percent, the International Monetary Fund said in April.

Data such as a rise in retail sales for the second month in April and a jump in business and consumer confidence to a six- month high in May have fuelled optimism that that the economy is starting to pull out of the slump.

Still, EU-wide unemployment reached 9.2 percent in April, the highest in almost a decade, and the European Commission predicts the economy will shrink 4 percent in 2009 and another 0.1 percent in 2010.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

Last Updated: June 7, 2009 17:29 EDT