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The Wall Street Journal
Vote Jars Spain's Ruling Socialists
Party Suffers Losses in Local Elections
Amid Widespread Protests Over Continued Economic Crisis
By JONATHAN HOUSE

TOLEDO, Spain—Prime Minister José Luis Rodríguez Zapatero's Socialist Party suffered historic losses in Spanish municipal and regional elections on Sunday, as discontent with a dire economic situation boiled over into nationwide protests.








European Pressphoto Agency
Popular Party supporters celebrate early municipal and regional election results
in front of the party's headquarters in Madrid on Sunday.
With nearly all of the ballots tallied, the opposition Popular Party, led by Mariano Rajoy, had 37.55% of the municipal vote across the country, nearly 10 percentage points more than the Socialists, the largest difference between the two parties since the local elections of 1991. In addition, with more than 75% of the vote tallied, the PP had commanding leads in both Castilla-La Mancha and Extremadura, regions the Socialists have ruled for decades.




Spain's Socialist Party suffered historic losses in elections on Sunday, as discontent with a dire economic situation boiled over into nationwide protests. Stephen Bernard looks at the implications for that country's debt crisis.

"The PP has won the elections in Castilla-La Mancha," said Maria Dolores de Cospedal, the conservative party's candidate for regional president, told supporters gathered in Toledo, the capital of Castilla-La Mancha.

Sunday's vote in 13 out of Spain's 17 regions and in all of its more than 8,000 municipalities is seen as a warm-up for national elections Mr. Zapatero must call by March 2012.

At the Socialist Party's headquarters in Madrid, Mr. Zapatero acknowledged his party had "clearly lost" the elections and congratulated the PP on its gains. He told journalists the defeat was "very clearly related to the economic crisis."

Spain's Socialists Trounced



Paul White/Associated Press

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Analysts have warned that a big reversal for the Socialists could undermine Mr. Zapatero's minority government at a time when it is trying to push through a sweeping program of economic overhauls and budget cuts.

Mr. Zapatero, however, ruled out early elections. He said his party will turn to its usual parliamentary allies for the support necessary "to carry out the economic reforms the country needs."

In the week leading up to the vote, pre-election jitters drove up Spain's risk premium, as measured by the spread of its 10-year government bond over the German benchmark, by around 0.2 percentage point, to 2.43 points.

In a note to investors Friday, Citigroup economists said "a political defeat for the Socialist Party would reinforce our doubts" about Spain's ability to achieve its "too optimistic" targets for budget-deficit reduction and economic growth.



Getty Images Demonstrators gather at sunset after another day of protests
at Sol Square on Saturday in Madrid.

Even worse, some local economists and business leaders forecast changes to regional and municipal governments could lead to the discovery of piles of undeclared debt, as happened in Catalonia. After moderate Catalan nationalists dislodged a Socialist government in the wealthy northeastern region in November, incoming officials said the local budget deficit was twice as big as previously thought.

Hidden-debt concerns played a central role in campaigning in regions like Castilla-La Mancha, where the PP and local business leaders said the region hasn't booked 90,000 unpaid invoices of around €1 billion ($1.42 billion). Ms. Cospedal, has pledged the first thing she will do if elected is commission an audit of Castilla-La Mancha's accounts.






In Madrid, youths continued to crowd the central Puerta de Sol Square as part of a weeklong movement that has brought out tens of thousands of protesters in several large Spanish cities. Exasperated by Spanish politicians' inability to find solutions to a deep economic crisis and an unemployment rate of more than 21%, they are asking for new aid for the unemployed, elimination of politicians' privileges and housing support for young people.

Still, the number of protesters isn't unusual by local standards, in a country where single-city rallies often attract thousands to protest against terrorism or in favor of international or social causes. And they don't seem to have attracted a big following in smaller cities.

"In Toledo, they haven't had an impact," said Nicolás Moragón, a 24-year-old student. "Their ideas are too idealistic."




Tens of thousands of people gather in Madrid's central Plaza del Sol on the seventh day of protests
against high unemployment and austerity measures. Video courtesy Reuters.

Spain's electoral commission had declared the gatherings illegal during the election weekend, though the government shied away from ordering police to disperse the large gatherings in cities like Madrid, Barcelona and Valencia.

The protests were expected to boost nonmainstream parties at Sunday's vote.
Outside a Madrid polling station, Natalia Molinos, 31, said she had voted for a party called Citizens for a Blank Vote. "I didn't want to vote for the PP or the Socialists," she said.

The protests didn't seem to have undermined voter turnout, which rose slightly compared with 2007 local elections.


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