Rajoy Seeks Proof Cuts Don’t Mean Defeat in Local Spain Vote

Prime Minister Mariano Rajoy may hold on to power in his home region of Galicia even as fallout over austerity saps his support elsewhere, in local voting that may ease an obstacle to a Spanish bailout request.

The People’s Party may hold on to its 38 seats in the 75- member regional assembly in voting this weekend, maintaining the majority it’s held since 2009, a poll by the state-run CIS indicated on Oct. 5. If it falls short, Socialists and Galician nationalists would seek to govern in a coalition. The Basque Country, where the PP has never won an election, also votes on Oct. 21, and polls signal nationalists in the lead.

Rajoy, who flies home from a European summit in Brussels today to give the closing campaign speech in Galicia, is counting on the outcome to show he can still win votes even after implementing the deepest budget cuts in three decades. The end of the campaign may also reduce political pressure on the premier to delay a European bailout request and free his hand to make deeper deficit cuts.

“If they keep their majority, Rajoy’s first message will be we can implement austerity and still win elections,” said Antonio Barroso, an analyst at Eurasia in London and former Spanish government pollster. “He’ll gain breathing space.”

Protests, Strikes

Rajoy is implementing about 100 billion euros ($131 billion) of budget cuts, prompting unions to announce today that they will hold a general strike on Nov. 14, the second since the government came to power in December. Galicia, run by the PP’s Alberto Nunez Feijoo, has one of the smallest deficit of the 17 regions and isn’t tapping the central government’s bailout fund for cash-strapped states.

Even after cutting spending, Feijoo has the backing of 35 percent of Galicians for the president’s job compared with 12 percent for Socialist leader Pachi Vazquez, the CIS poll showed.

Support for the PP is even stronger in other surveys. A poll by Sondaxe for the Voz de Galicia newspaper indicated the PP would win 39 seats, clearing a majority, and a poll for national newspaper ABC showed they would win 40-41 seats.

The end of the campaign may also remove one obstacle to Spain seeking a European bailout, said Alejandro Quiroga, a political scientist at Newcastle University in the U.K. and Alcala de Henares University in Madrid.

Budget Delay

“It’s the same thing as they did with the Andalusian elections, not presenting the budget until after the vote,” he said in a telephone interview.

The 2012 austerity budget was presented on March 30, three months after Rajoy came to power and five days after the PP failed to clinch a majority in Andalusian elections that polls had indicated it would win.

Rajoy has spent more than two months mulling a decision on whether to request ECB bond buying to bring down borrowing costs. He said today he isn’t facing pressure from European peers to seek help and the fact the rescue mechanism “exists” is “very important.” Even with the yield on the country’s benchmark 10-year bond near a seven month-low, the country still pays 375 basis points more to borrow than Germany.

The elections may have also led the national government to postpone until next month a decision on whether to raise pensions in line with inflation. The government has signaled it would do so even as the Bank of Spain urges it not to risk blowing out the budget by adding 3 billion euros to this year’s pension bill.

Aging Population

Galicia, which is holding elections four months ahead of schedule, has the second-oldest population in Spain. The 600,000 Galicians over the age of 65 make up more than a fifth of the region’s population, data from the National Statistics Institute show. The PP’s margin of victory over the Socialists in 2009, including non-residents who can vote, was 264,939.

Rajoy hails from Galicia, Spain’s fifth-biggest region by population and home to the late founder of the ruling PP, Manuel Fraga. It has been governed by the PP for most of the last three decades and Feijoo is seen as a possible successor to the premier.

After elections on Oct. 21 and a Nov. 25 poll in Catalonia that will focus on whether the region should seek independence from Spain, Rajoy won’t have to go back to the campaign trail until 2015.

“This frees him up a bit and clears his path,” Barroso said.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net;

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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