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Spanish elections bolster Rajoy's austerity policies

Prime Minister Rajoy's ruling, pro-austerity party was a winner in Spain's regional elections this weekend, but so were independence-minded parties that could hurt his economic measures.

By Correspondent / October 22, 2012

Alberto Nunez Feijoo (c.), the president of the Spanish region of Galicia and candidate of the People's Party, waves during a news conference at his party headquarters in Santiago de Compostela on Sunday. Spain's ruling center-right People's Party won a key regional election in Galicia, according to exit polls, providing strong support for Prime Minister Mariano Rajoy's national austerity drive.

Miguel Vidal/Reuters

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Madrid

A strong showing in regional elections over the weekend gave the Spanish government much-needed breathing room – especially as it was coupled with the waning clout of its rival – to manage the country’s economic crisis. But it also opened the door to more instability as independence-leaning parties made defining gains.

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On the economic front, the ruling Popular Party and the government won strong support for its pro-austerity policies. In the western region of Galicia that borders Portugal, the PP renewed its absolute majority in the regional parliament, increasing its control. And in the Basque Country, the Nationalist Basque Party returns to power with the kind of austere economic policy that the central government is imposing.

In both cases the Socialist Party, the closest national rival of the ruling PP and a vocal critic of austerity measures, suffered significant losses at the ballot box, albeit to the benefit of more left-leaning parties.

“The two elections suggest voters are taking into the account the severity of the crisis and that sacrifices are inevitable,” says Josep Oliver, applied economics professor in the Universidad Autónoma de Barcelona. The austerity policies implemented by the government “don’t appear to be considered unacceptable and indicate that Spain’s society, after some difficulty, is starting to understand that this crisis demands reforms.”

The unexpectedly strong showing of the PP not only gave the government more internal political capital, but a strong mandate to pursue its belt-tightening economic policy, in a welcome sign for capital markets. Spain is broadly expected to officially request a bailout for its troubled economy, even if it’s still trying to negotiate terms with the ultimate decider, Germany. The electoral results gave an unexpected boost to the government’s policies, and could thus alter the playing field, analysts say.

The election results indicate that vastly more Spaniards back economic reforms than oppose it. But they also warned that the government must gear for a perhaps more destabilizing scenario in which the country’s industrial powerhouses will push their independence aspirations.

In the Basque Country, the winning party is economically conservative, but it also is expected to now pursue a path to full sovereignty, especially with the support of the pro-independence coalition that won a close second place.

Catalonia, Spain’s most important economic motor, will hold elections in November and, as in the Basque Country, the leading party in polls is also economically conservative, but has already committed itself to seek full independence.

More austerity and nationalism

The PP won 41 seats of the 75-member Galicia parliament, five more than in 2009 elections. Socialists lost seven seats and now only have 18, while a left-leaning party made the biggest gains.

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