Bloomberg News

Zapatero Calls Election as Polls Give Opposition Record Lead

September 26, 2011

(Updates with Rajoy comments in fourth paragraph.)

Sept. 26 (Bloomberg) -- Spanish Prime Minister Jose Luis Rodriguez Zapatero called early elections as polls show voters will ditch his Socialist party over its handling of the debt crisis in favor of opposition pledges of jobs and tax breaks.

Zapatero, who first called the early election in July, dissolved Parliament today and said the campaign will start on Nov. 4, two weeks before the Nov. 20 vote. The People’s Party of Mariano Rajoy may secure a majority, allowing it to pursue plans to cut taxes for small firms, overhaul banks and change labor rules without needing smaller parties’ support, polls show.

With the jobless rate above 20 percent for the past year and a half, Zapatero, who isn’t seeking a third term, has angered his traditional backers with public-wage cuts and a pension freeze in a bid to shield Spain from the sovereign-debt crisis. The election pitches Rajoy, who seeks a slimmer state and help for entrepreneurs, against Socialist candidate Alfredo Perez Rubalcaba’s vows to protect welfare and tax the rich.

“The challenge ahead isn’t easy and no one has a magic wand to solve things quickly,” Rajoy told a televised news conference today. “I will form a government that is credible, predictable and solvent.”

Latest Victim

Zapatero, who called the election four months early, will become the third euro-area leader to be punished for the debt crisis after voters in Portugal and Ireland ejected their premiers following European bailouts, polls show. Rajoy may win the largest outright majority on record, with as many as 189 seats in the 350-strong Parliament and a 14.6 percentage-point lead, El Periodico reported today. A poll commissioned by El Pais, a traditional ally of Socialist administrations, gave Rajoy a 14.1 percentage-point lead on Sept. 12.

Rajoy, 56, and Rubalcaba, 60, are both former deputy prime ministers and interior ministers, and are older than the man they hope to succeed. Rajoy was appointed by former Prime Minister Jose Maria Aznar as his successor for the election in 2004, which he lost. Rubalcaba won the Socialist nomination without primaries in July.

Rajoy has said he “wouldn’t like” to cut pensions or spending on health and education, even as he says that his government won’t stray from Spain’s goal of cutting the budget deficit to 4.4 percent of gross domestic product in 2012 from 9.2 percent in 2010 “under any circumstances.” He pledged on Sept. 15 to send a “strong signal” to markets with a stricter budget law as well as tax breaks for companies that reinvest profits. He plans to cut levies on small- and medium-sized companies and bring back a tax rebate for mortgage-holders worth as much as 1,350 euros ($1,817) a year.

New Taxes

Rubalcaba, a chemist by training, is focusing his campaign on protecting the welfare state, while planning a new tax on banks to reduce the 46 percent youth unemployment rate. In response to nationwide protests by the so-called “indignant ones” against bank bailouts and austerity measures, he also aims to create a new levy on the wealthy.

While Parliament is closed, Spanish legislation allows for any emergency decrees passed by the government to be ratified by Parliament’s permanent committee. Zapatero said today he doesn’t plan any “significant” economic measures before Nov. 20. Parliament will be reconvened on Dec. 13, he said.

--Editors: Jeffrey Donovan, Fergal O’Brien

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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