By Nigel Davies

MADRID (Reuters) - Spain's northwestern region of Galicia said on Monday it would move up local elections to October 21, in what is seen as a mini-referendum on Prime Minister Mariano Rajoy's deep spending cuts to stave off the euro zone debt crisis.

Both Galicia, a longtime stronghold for Rajoy's conservative People's Party, and the Basque Country will have early elections on the same day, as leaders in both regions seek consensus for tough cost cuts in 2013 budgets.

In Galicia, pollsters say the PP is at risk of losing its absolute majority in the regional legislature, or even of losing power altogether, possibly to a Socialist opposition group, which has yet to choose a candidate and establish a platform.

A shift in power might not mean an outright rebellion against austerity programs in Galicia, but it would be psychologically damaging to the PP if a traditional stronghold falls to the opposition at a time of growing discontent over spending cuts in sensitive areas like schools and hospitals.

A PP loss would also be a heavy blow for the ruling party since Alberto Nunez Feijoo, the current PP leader of Galicia, is a friend and ally of Rajoy, who is himself from Galicia.

"September is going to be a difficult month for the government, and now October too. People will want to see what measures the government takes in September before deciding who to vote for in Galicia," said Jose Pablo Ferrandiz, analyst at polling firm Metroscopia.

"If the PP lose in Galicia, which cannot be ruled out, and we see a change in the Basque Country, then we'll have two more points of tension for the government," he said.

Galician elections were originally scheduled for March next year. The new election date means a fresh government will both pass and execute its own budget rather than passing a budget that would be inherited by a new government.

The fiscal health of Spain's 17 autonomous regions is a key concern for investors as many struggle to control their accounts in a tough recession, which could in turn knock the country's deficit objectives off course.

The PP currently rules in most of the 17 regions and also in most of Spain's thousands of municipalities. The regions and the city governments together account for around 50 percent of public spending. Galicia and the Basque Country have healthy finances and small deficits compared with many other regions.

Rajoy recently announced 65 billion euros in spending cuts to try to reach a deficit target of 3 percent of gross domestic product by 2014 as he tries to keep Spain from following Greece, Ireland and Portugal into an international bailout.

Rajoy delayed announcing his tough budget measures until after May regional elections in Andalucia, hoping that his party would be able to break more than three decades of Socialist hegemony. But the Socialists managed to hold on to power as voters began to worry about drastic cost cutting.

Most regions remain committed to the government's austerity measures, but protests are growing against cuts to public services such as healthcare and education, the two key areas the regions have responsibility for.

In the Basque Country, polls show the nationalist Partido Nacional Vasco (PNV) is set to win the elections, knocking aside a Socialist government whose fragile coalition with the PP broke down before the summer.

The PNV, which will likely call for further fiscal autonomy from Madrid, may well need to form a coalition to govern with the left-leaning Bildu.

In an interview with El Pais newspaper published on Monday, PNV head Inigo Urkullu said he would have to pass tough budgets going forward should he win the election.

The elections in the Basque Country will be the first since violent Basque separatist group ETA announced an end to its armed struggle last year. A poll in El Mundo newspaper on Monday showed Basque people wanted to have more autonomy from the central government, but did not want full independence from Spain.

(Editing by Fiona Ortiz)




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