People’s Party leader Mariano Rajoy won the biggest parliamentary majority in a Spanish election in more than a quarter century, giving him a free hand to overhaul an economy that risks being overwhelmed by the sovereign debt crisis.
The PP won 44.5 percent of the vote and 186 of the 350 seats in Parliament, compared with 28.7 percent and 110 seats for the Socialist Party’s candidate Alfredo Perez Rubalcaba, with 91 percent of the vote counted. That’s the worst showing for the Socialists since the Spain’s return to democracy in 1978.
“We are facing a decisive moment for Spain,” Rajoy said in an acceptance speech in Madrid. “We are at a crossroads that will shape the future of this great country not just in the next few years but the next few decades.”
The ruling Socialists became the fifth European government to be toppled by fallout from sovereign debt crisis, after Italy and Greece appointed prime ministers and Irish and Portuguese voters fired their leaders after they sought bailouts. Spaniards gave Rajoy the biggest mandate of the group to respond to the crisis.
Rajoy, who said on Nov. 18 he hoped Spain wouldn’t need a bailout before his new government takes over in a month’s time, has pledged to slash the budget deficit and regain the nation’s AAA credit rating. He inherits a stagnant economy with a 23 percent unemployment rate and borrowing costs back at the levels Spain was paying before it joined the euro.
“From a market standpoint, an absolute majority for the PP is just what the doctor ordered,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “We will now see to what extent domestic policy reforms, even if ambitious and swiftly enacted, can help turn sentiment around.”
Spain’s 10-year bond yield rose as high as 6.78 percent on Nov. 17, the most since the start of the euro, with the gap between Spanish and German borrowing costs ending the week at 441 basis points, or 4.41 percentage points. As yields spiraled, Socialist Prime Minister Jose Luis Rodriguez Zapatero, who didn’t seek re-election, called on the European Central Bank to act “immediately.”