Spanish PM offers dialogue with other parties to form government

Spanish Prime Minister Mariano Rajoy speaks in Madrid. (AFP/Cesar Manso)

MADRID: Spain's Prime Minister Mariano Rajoy faced an uphill battle to stay in power on Monday (Dec 21) after his conservatives lost their majority in an election that saw dynamic new political groupings end decades of two-party rule.

For more than 30 years, Rajoy's Popular Party (PP) and the Socialists had alternated power, but millions of Spaniards exasperated with austerity and corruption scandals voted relative newcomers far-left Podemos and centre-right Ciudadanos into third and fourth place.

In his first press briefing since Sunday polls that saw the PP take the largest share of the vote but lose its absolute majority in parliament, Rajoy offered dialogue with other formations to forge a government.

But he cautioned he would only reach out to parties defending the unity of Spain or its European commitments - which appears to rule out anti-austerity Podemos and two Catalan separatist groupings that secured 17 parliamentary seats.

"Spain cannot afford a period of political lack of clarity that would spoil the progress achieved during these years," Rajoy said.

As the Socialist Party (PSOE) - which came second in the legislative polls - has said it will not back a Rajoy-led cabinet, he has his work cut out. And with the upstart Ciudadanos also ruling out backing Rajoy, the austere 60-year-old premier appears increasingly beleaguered and alienated.

'Weak government'

The outcome of the most closely fought election in Spain's modern history has plunged the country into turmoil just as it was starting to recover from a devastating financial crisis.

And the prospect of weeks of political uncertainty saw the Madrid stock market close down 3.6 per cent with bank stocks and those of firms which are dependent on government business the hardest hit.

Fitch ratings agency warned that there was a risk of "a weak government or one reliant on more radical parties" which could lead to "some roll-back of previous reforms and fiscal loosening".

Official results showed the PP won 123 seats - 63 less than in 2011 when it roared to victory with an absolute majority - with almost 29 per cent of the vote..

The Socialists followed winning 90 seats with 22 per cent of the vote, then Podemos 69 seats with almost 21 per cent, and finally the centrists Ciudadanos 40 seats with nearly 14 per cent.

The outcome means parliament will be made up of four main groupings with significant clout, as opposed to the usual PP and Socialists tandem - putting an end to Spain's traditional two-party system.

"The result leaves several options of possible deals to form a government, but all of them would require cooperation between three or even four parties, something unprecedented in Spanish politics," said Angel Talavera, an analyst at Oxford Economics in London who predicted fresh elections "in the coming months" are likely.

New elections

The outcome caps a year of electoral change in southern Europe after Syriza leftists swept to power in Greece in January and a coalition of left-wing parties in Portugal pooled their votes in parliament to unseat the conservative government after an inconclusive election in October.

Sky-high unemployment, inequality, corruption and an ever-rising separatist drive in the northeastern region of Catalonia were just some of the issues at stake in a country deeply scarred by the financial crisis and fed up with what many considered a staid political scene.

After holding talks with the leaders of each party that has won seats in parliament, King Felipe VI, the head of state, will nominate a prime minister - most likely Rajoy. The nominated leader must then win a vote of confidence in parliament in order to take office.

Ciudadanos has said it will abstain in the vote to allow the PP to govern in a minority but this would not be enough. "Spaniards demand a sense of responsibility," Ciudadanos leader Albert Rivera said.

While the PSOE has rejected Rajoy, it could agree not to vote against a conservative government that excludes the incumbent premier, said Fernando Vallespin, politics professor at Madrid's Autonomous University.

If there is still a deadlock within two months of the first vote, the king must call new elections.

Rajoy had positioned himself as a safe pair of hands who dragged the country away from economic collapse when he took power in 2011 and put it on the path of recovery.

But unemployment remains stubbornly high at more than 21 per cent, and millions of Spaniards became fed up with austerity-sparked inequality as well as repeated corruption scandals - one of the factors behind the rise of the two new parties.