This article is more than 8 years old

This article is more than 8 years old

The conservative People's party (PP) of Mariano Rajoy has swept to a landslide victory in Spain's general election, inheriting sky-high unemployment and one of the shakiest economies in Europe.

Rajoy's PP gained an absolute parliamentary majority with a crushing 16 percentage point win over the Socialists of outgoing prime minister José Luis Rodríguez Zapatero.

The Socialists lost a third of their seats as voters dumped a government that presided over a dramatic economic slump which has left 23% of Spaniards out of work.

With the PP winning 186 of the 350 seats in parliament, 56-year-old Rajoy was given a free hand to carry out sweeping reforms and impose further austerity in an attempt to turn the country around.

"It is no secret to anyone that we are going to rule in the most delicate circumstances Spain has faced in 30 years," he said. He pleaded for time. "There will be no miracles," he said. "We haven't promised any."

With yields on Spanish sovereign debt reaching new highs at the end of last week, markets are unlikely to give him much breathing space. He will come under immediate pressure to reveal exactly how he intends to kickstart growth, which is currently at zero, and cut spending.

The burst housing bubble has left banks dangerously exposed to loans to real estate developers and construction companies.

Unlike neighbouring Italy or Greece, which handed the reins of government to unelected technocrats in recent weeks, Spaniards have been able to choose the government they want to deal with one of the worst economic crises in living memory.

They can expect an immediate dose of added austerity, with experts saying Rajoy must find at least €18bn (£15.4bn) through cuts or tax rises next year. "This could calm the markets, but until the new government does what it says it's going to do, nothing will change," said Angel Laborda, chief economist at the Spanish savings banks' thinktank, Funcas.

Rajoy said his government was determined to be an important player in the European Union, where there is growing concern that the eurozone countries could split into two or more parts.

"Today more than ever our destiny is played out in and with Europe," he said. "We will stop being part of the problem and start becoming part of the solution."

With Spain's sovereign debt yields last week approaching the levels at which Portugal and Greece needed bailouts, Socialist candidate Alfredo Pérez Rubalcaba had little chance of extending the seven-and-a-half year period of leftwing government under Zapatero.

The Socialist prime minister had brought elections forward by six months and said he would not stand again.

Zapatero stays on as caretaker prime minister for another month, however, as parliament must meet and the king has to consult political parties before a new government is formed. Parliament does not sit until 13 December.

It was not clear how the caretaker government would co-ordinate its response to the sovereign debt crisis with Rajoy's plans, though it has promised to work with the PP.

Government spokesman José Blanco has rejected calls by senior PP officials for the handover to be speeded up. "The timings and calendar are determined by law and cannot be changed," he said.

Spaniards hope the change of government will calm markets that had increased pressure on the country's debt despite Zapatero's own austerity programme, which saw civil service pay cut and pensions frozen.

Deficit spending by regional governments, which provide basic services such as education and health, has also been squeezed, sending public service trades unions out in protest.

Zapatero has also extended the retirement age and changed the constitution to allow for a long-term deficit limit to be set on the budget. Rajoy has said one of his first measures will be to set that limit.

Rajoy's promises of major reforms, more austerity and strict deficit control are in tune with market demands and with those of Germany's Angela Merkel, the European Central Bank and the European commission.

PP shadow finance minister Cristóbal Montoro has said the new government will act hard and fast, introducing reforms immediately. Rajoy must now name his future finance minister. He has said in the past that he is happy to choose someone from outside the party, so may end up naming a market-friendly technocrat.

Further spending cuts on top of those already imposed by Zapatero risk tipping the country into recession. They may also be energetically opposed by the peaceful "indignado" movement that took over city squares earlier this year.

"From a market standpoint, an absolute majority for the PP is just what the doctor ordered," Nicholas Spiro, of Sovereign Strategy told Reuters in London. "The risk, however, is that more retrenchment pushes the economy back into recession."

For the first time in decades, Spaniards voted without the threat of violence from Basque separatist group Eta, which declared an end to 40 years of terrorism last month. Basque voters turned out in force and sent seven avowedly separatist deputies from the new Amaiur party to parliament.

Rubalcaba said he had asked Socialist officials to call a special party congress to discuss the future.

The Socialists' 110 crop of seats in parliament was their worst result since democracy was restored to Spain at elections in 1977.

Among a series of smaller parties to benefit from the socialist collapse was the communist-led United Left party, which increased its number of deputies from two to eleven.EU hopes for poll victLeader comment, page 28