Faced with a recession that has largely undone decades of Franco-era and post-Franco era prosperity, angry Spaniards booted out the Socialists and gave conservatives one of the biggest election victories in Spain in 30 years — raising expectations and bringing a warning from the man who’ll be sworn in as Prime Minister next month that miracles won’t occur overnight.
Popular Party leader Mariano Rajoy was under pressure on Monday to give rapid details of his policies to overcome the worst economic crisis for generations as his overwhelming election victory did little to calm the nerves of investors.
Rajoy’s conservative People’s Party (PP) notched up the biggest election victory in 30 years on Sunday, with angry voters savaging the outgoing Socialists for a crisis that has pushed unemployment in Spain to more than 20 percent, the highest in the European Union.
The Socialists were the fifth euro zone government to be toppled by a debt crisis that now seems out of the control of vulnerable individual countries.
But with little real detail on Rajoy’s plans, the spread between yields on Spanish government bonds and safe haven German bunds widened on Monday morning by 20 basis points to 463.
Ten-year yields were higher, at 6.57 percent, creeping closer to the perilous 7 percent level that forced countries like Greece and Portugal to seek bailouts.
Under Spain’s long transition process, Rajoy will not take power until around December 20 but he will have little time to bask in the huge victory for his People’s Party.
There is pressure for him to calm jittery markets with some word on what are expected to be deep and painful austerity measures. Since his victory he has only said that there will be no miracles to fix the crisis.
At the end of a campaign dominated by the debt crisis, the centre right PP secured 186 seats in the 350-seat lower house of parliament.
However, Spain’s borrowing costs continued to mount on Monday and the stock market fell by 2%.
Mr Rajoy said: “There won’t be any miracles. We never promised any.”
Speaking outside party headquarters in central Madrid, he assured his audience: “We will stop being part of the problem and will be part of the solution.”
The PP leader, faced with slow growth and high unemployment, is unlikely to be sworn in by King Juan Carlos until 22 December, according to media reports on Monday.
“Forty-six million Spaniards are going to wage a battle against the crisis,” he said.
The Socialists, who have ruled Spain since 2004, slumped to 110 seats with 28.73% of the vote, their worst performance since the return of democracy to Spain in 1975.
The PP won 44.62% of the vote in a turnout of 71% of the electorate.
Socialist candidate Alfredo Perez Rubalcaba conceded that his party had not had “a good result”. Defence Secretary Carme Chacon called it a “severe defeat”.
Mariano Rajoy, who has become Spain’s prime minister after an eight-year wait, will have to act quickly as borrowing costs approach euro-era records and the country risks becoming the next victim of the region’s debt crisis.
Spain’s 10-year bond yield rose to 6.566 percent at 10:02 a.m. in Madrid from 6.379 percent on Nov. 18 after the People’s Party yesterday beat the ruling Socialists and their candidate Alfredo Perez Rubalcaba in a landslide, winning 186 seats in the 350 seat Parliament. The gap between Spanish and German borrowing costs widened to 465 basis points and the Ibex 35 stock index fell 1.9 percent.
“Just as markets weren’t particularly heartened by the arrival last week of Mr. Monti on Italy’s political scene, it is unlikely there’ll be a Rajoy relief rally,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “Investors are primarily concerned with the credibility of plans to shore up euro-zone sovereign debt.”
Rajoy, who was twice defeated in elections by Prime Minister Jose Luis Rodriguez Zapatero, handed the Socialists their worst defeat since Spain’s return to democracy in 1978. Rajoy’s PP won the biggest parliamentary majority of any government in almost 30 years. A 30-year veteran of the People’s Party, Rajoy owes much of his success in the election to the failure of his adversaries and has given few specifics on how he plans to slash the deficit and contain the debt.
“Time is running out and by the time a new government comes in, it will have run out,” said Fernando Eguidazu, president of the economic policy committee of the pro- entrepreneur lobby Circulo de Empresarios. “The new government will have to implement measures extremely quickly because the markets will not give us any grace period.”
At 56 years old, Rajoy is Spain’s oldest leader to come to power since the death of dictator General Francisco Franco in 1975. Spain’s deepest economic crisis in six decades eroded support for the Socialists and they leave the scene with the country’s 10-year bond yield near the 7 percent level that led Greece, Ireland and Portugal to seek bailouts. It rose as high as 6.78 percent on Nov. 17, back at the levels Spain was paying before it joined the euro.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.