Oct. 22 (Bloomberg) -- Spanish Prime Minister Mariano Rajoy’s People’s Party said victory in regional elections yesterday that extended its majority in Galicia vindicated his austerity program.
“The steps that we have explained have to be taken to resolve the crisis have had overwhelming support,” Carlos Floriano, the party campaign chief, said in an interview on public broadcaster Radio Nacional de Espana. “There is no precedent in this crisis situation of a government not just defending but increasing its majority.”
The PP won 41 of the 75 seats in the regional assembly, adding three. The Socialists lost almost half of their votes and a new leftist group took nine seats. In the Basque Country, the Basque Nationalist Party won 27 seats, allowing it to lead a government in the 75-seat chamber through alliances with other parties including the 21 separatist lawmakers of Bildu.
The election result clears one obstacle from Rajoy’s path as he mulls a bailout, putting Europe’s newest crisis-fighting tools to the test in an economy that’s twice the combined size of Greece, Ireland and Portugal. At a summit last week, European Union leaders failed to fulfill pledges made in June for greater integration, as German Chancellor Angela Merkel pushed back against demands from France and Spain.
“He’ll want to hold off a couple of weeks before asking for the bailout to save face and show they weren’t waiting for the elections,” said Ken Dubin, a political scientist who teaches at IE business school and Carlos III University in Madrid. “It’s game on” for budget cuts, he said in a telephone interview.
Spanish bonds fell with the yield on 10-year debt rising 5 basis points to 5.88 percent at 10:00 a.m. Madrid time. Even after a rally last week, Spain still pays 378 basis points more than Germany to borrow for 10 years; the Ibex-35 was little changed.
The PP’s gain in Galicia reflected the collapse of its main rivals. The Socialist Party’s 294,000 votes, just over half what it received in 2009, reduced its representation to 18 lawmakers from 25 while the Galician Nationalists’ vote dropped 46 percent as they claimed 7 seats.
Nationally, support for the PP fell to 37 percent from 45 percent at the November election, a poll by state-run CIS showed on Aug. 6. A Metroscopia poll for the newspaper El Pais last month showed 84 percent of Spanish voters have little or no confidence in Rajoy.
Galicia, run by Alberto Nunez Feijoo since 2009, was one of the first regions to implement an austerity program and had one of the smallest deficits last year. Feijoo, seen as a possible successor to Rajoy, coupled cuts in health care with sales of the administration’s luxury cars.
Rajoy’s next date with the electorate comes on Nov. 25, when Catalonia holds an early election focused on whether the region that accounts for a fifth of Spain’s economy should seek independence. With nationalists set to govern in the Basque Country, Rajoy will have to fight secessionist bids on two fronts.
Artur Mas, president of the Catalan region, has pledged a referendum on independence if he wins the vote next month while Basque Nationalist Party leader Inigo Urkullu has said he’ll join forces with Mas to push for greater autonomy for two of Spain’s richest states.
“We think Rajoy should request European support before the Catalan elections, since the market is likely to react quite negatively to yet another nationalist success,” Gilles Moec, co-chief economist at Deutsche Bank in London, wrote in an e-mail.
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