Regional vote is Rajoy's big test

 

PM Mariano Rajoy faces a high-stakes election in his home region of Galicia on Sunday in which voters could punish him for his handling of the euro zone debt crisis.

The vote has become a referendum on Rajoy's bank bailout, spending cuts and tax hikes and the seeming inevitability of a second euro zone aid package, which officials have told Reuters could be sought next month.

"I think the People's Party (PP) will be punished," business owner and PP supporter Agustin Garcia-Monton said after attending mass in the cathedral of the pilgrimage town of Santiago de Compostela, where Rajoy was born.

European sources and analysts said Rajoy wanted to wait until after the election to make an aid request as he feared tough attached conditions, such as a reform of the pension system, could anger voters. Elections also take place in the Basque country on October 21.

His party risks losing its absolute majority, and power altogether, in Galicia's legislature. This would be a major psychological blow to Rajoy, whose conservative PP party has ruled his homeland for 24 of the past 31 years.

A win would give Rajoy much-needed political breathing space nationally as polls have shown him losing support amid massive demonstrations against spending cuts in public services.

Garcia-Monton, like almost 40% of Galicians in a survey in newspaper La Voz de Galicia, was still undecided how to vote, making the result especially hard to predict.

He said he would probably vote PP since he approved debt-cutting by the PP head of the regional government, but he felt Rajoy's government had hung back in reforming working hours in the public sector.

The doubts of ideological conservatives like Garcia-Monton could lead to higher abstentions than usual or a surge for Galicia's BNG nationalist party or smaller parties, which could finish with a coalition forcing the PP from power.

The newspaper poll saw the PP taking 39 seats to the Socialists' 21, but earlier polls had shown the party short of the 38 seats needed for an absolute majority.

SECOND RECESSION

The vote comes at a time when Spain has entered its second recession since 2009 and the IMF has forecast the economy will deteriorate by 1.5% next year as deficit-cutting measures such as VAT hikes further damage economic activity.

Although unemployment in Galicia at 21.0% is lower than the Spanish average of 24.6%, with wealth generated by Spain's largest clothes retailer, Zara maker Inditex, based in A Coruna, some sectors are struggling to survive.

Small, well-established businesses have closed in the old part of the port town Vigo and Inmaculada Marin, deputy head of the Association of Traders and Guest House Owners of the Old Town, who joined the Socialist party six months ago, says she finds traditional PP voters switching allegiances.

"There is a wave of fear in small businesses because they know this Christmas people are not going to be able to sell what they sold earlier," Marin said.

Some Galicians think spending cuts could push the region back to the darker times of the past, when thousands emigrated to Latin America to earn a better living during the dictatorship of General Francisco Franco from 1939 to 1975.

Of the 2.7 million Galicians eligible to vote, 397,000 of them live abroad. In the past year, more than 2,000 young Galicians left the region every month, the National Statistics Institute says.

"From 2008, there is a disappearance of all the knowledge and academic preparation of those under 30," said Carmen Avendano, chairwoman of the anti-drug association Erguete and board member of the local football club Real Club Celta. "Either that is changed ... so they can profit society, or the future will be very black."

OVERSPENDING BLAMED

Opposition parties have accused the government of using the crisis to claw back the extensive powers of its 17 autonomous regions, whose overspending was partly to blame for the failure of the country to meet its deficit targets last year.

"Rajoy and Feijoo decided to call early elections (in Galicia) because there is going to be a bailout," Pachi Vazquez, Socialist leader in Galicia, told Reuters, referring to Alberto Nunez Feijoo, Galicia's head of government.

"But they're not going to bail out people, they're going to bail out banks at the expense of people, pensions, public sector workers, with cuts and cuts to social rights."

Rajoy has said he is waiting to learn the conditions of any bailout before requesting it. But the prospect has prompted Feijoo, a potential political heir, to distance himself from the prime minister during campaigning.

The two have appeared together in the region just once, despite several visits by Rajoy, and Feijoo's rally posters contain a discreet PP logo and a photo of Feijoo, with the slogan "Galicia first" in the Galician language.

They are, however, expected to close the official campaign together on Friday night.

Polling takes place the same day in the Basque Country and another election is due in Catalonia on Nov. 25. Spain's autonomous regions each have their own parliaments to make decisions on health, education and social services.