MADRID: One of the first tasks of re-elected prime minister Jose Luis Rodriguez Zapatero will be to inject life into Spain’s faltering economy to prevent a crisis of confidence turning into something worse.

The governing Socialist party won Sunday’s parliamentary election, without an absolute majority, after a bitter campaign where the faltering economy took a central role.

Mr Zapatero now has to quickly implement a package of proposals to stimulate the economy, using the budget surplus to cut taxes and increase spending on public works.

“What I expect now is an emergency fiscal package which is probably going to be announced very soon, in the first week after the elections,” said Gilles Moec, analyst at Bank of America.

Analysts said markets were likely to take the expected Socialist victory in their stride on Monday, but the lack of an overall majority could be a cause for concern as it may delay the introduction of stimulatory measures.

Spain’s economy has grown for 14 straight years, outperforming Eurozone growth, but the future looks bleak as a decade-long housing boom ends and the global credit squeeze pressures highly-indebted companies and households.

Unemployment rose to a nine-year high in February, rising faster than anywhere else in Europe, while inflation is at a 12-year high of 4.4 per cent, the highest in the Eurozone.

Darkening the outlook further are a moribund manufacturing industry, faltering house prices and plummeting business confidence all putting Mr Zapatero in an unenviable position as he starts his second term.

The Socialists’ fiscal proposals are similar to those of the opposition conservatives, centring on tax cuts and rises in minimum wages and pensions and public works spending.

Mr Zapatero has promised a tax rebate of $616 to all wage earners, elimination of a wealth tax on personal assets and a cut in sales tax for certain products.

Analysts agree a swift introduction of stimulatory measures is essential to counteract the downturn.

“The speed at which the economy is slowing down is really impressive,” said Mr Moec.—Reuters