Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday announced early general elections in November, scheduling the race four months earlier than anticipated to give his Socialist Party a better chance to stay in power amid growing outrage over the nation's economic woes.
Zapatero set the election date for Nov. 20 even though he was not required to call elections until March and had resisted repeated calls by the conservative opposition for early polling.
"I want a new government to take control of the economy from January 1st next year," said Zapatero, who announced earlier this year he would not seek a third term.
"It is convenient to hold elections this fall so a new government can take charge of the economy in 2012, fresh from the balloting," he said.
The early elections are expected to help the Socialist Party candidate, Alfredo Perez Rubalcaba, Zapatero's former Interior Minister. While the Socialists have trailed Popular Party candidate Mariano Rajoy, a poll released Wednesday suggested they are closing the gap.
The miserable state of the economy is the single largest concern in Spain _ hours before Zapatero's announcement, ratings agency Moody's warned it could soon downgrade the country's credit rating.
Investors are asking for higher rates to lend money to Spain, raising fears that it could be next in Europe to require a rescue package.
And a nationwide malaise has set in, with highly educated young Spaniards dumbing down their resumes because they are overqualified for what jobs are available _ and increasingly looking to move abroad as unwilling expatriates.
The country's biggest international companies, including telecommunications firm Telefonica SA and Banco Santander SA, are increasingly relying on branches in booming Latin America while their Spain businesses dwindle.
"The only solution is to leave Spain, but that is a shame," said 25-year-old Monica Lopez, a college journalism graduate forced to work in a low level administrative post at a debt collector's office before she was laid off. "I am completely fed up.
The discontent is due not only to unemployment _ at a eurozone-record of 20.9 percent _ but also the austerity cuts enforced by Zapatero in the hope of reassuring markets that Spain can avoid needing a rescue package like neighboring Portugal.
The government lifted the retirement age to 67, hiked taxes, cut wages for public sector workers like teachers and police and forced mergers of troubled banks holding billions in unpaid mortgages.
Large anti-austerity protests have mushroomed around the country in recent months, mainly from young demonstrators ages 16-29 who face a stunning 35 percent joblessness rate.
There is not doubt the Socialists are under pressure. They hold a minority in Parliament, have just barely managed to rule through alliances with a handful of small parties, and were trounced in nationwide regional and municipal elections in May.
Rajoy claimed the announcement as a victory for himself, insisting Spaniards have had enough of the economic policies of Zapatero and his administration.
"Early elections are what the majority of the electorate wanted, so this is good news," Rajoy said.
Rajoy isn't expected to map out his campaign platform on the economy until September, but has said he favors labor reforms beyond what Zapatero has pushed through to try to help small and medium sized businesses start growing again. He said he has no intention of making further cuts to Spain's social welfare system and would govern from the center, but offered no details.
New polls showed that early elections are "the least bad" moment for Zapatero's party to try to retain control, said Ramon Cotarelo, a political science professor at Spain's Open University.
Adding to Spain's economic woes, Moody's warned Friday it may downgrade Spain's credit rating because of the country's weak economic growth prospects and high debt.
The move was a further sign that last week's bailout of Greece has not ended fears of debt crisis contagion elsewhere in Europe. Spain has the eurozone's fourth largest economy, and many economists say Europe can't afford to bail out the country.
Moody's said funding pressures on Spain are likely to increase following last week's bailout package for Greece, which has set the "precedent" of asking the private sector to take some losses on their investments in government bonds. Banks are being asked to rollover and swap their Greek debt holdings in an effort to relieve the burden on the country.
Moody's said Greece's second bailout package "has signaled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits."
Spain is struggling with the aftermath of a collapsed real-estate boom, and experts are predicting years of sluggish growth ahead. Though Spain's debt burden is not as high as Greece's, the country has a fairly sizable budget deficit, which requires constant funding in the bond markets.
The cost of borrowing for that funding has increased sharply in recent weeks, and continued to rise after last week's Greek deal, which was also aimed at easing pressure on the larger economies of Spain and Italy.
Iain Sullivan contributed from Madrid, and Pan Pylas contributed from London.