By Fiona Ortiz
MADRID (Reuters) - Spain's Alfredo Perez Rubalcaba courted disillusioned leftist voters on Saturday after the ruling Socialists anointed him candidate for prime minister in an uphill battle to retain power.
In a televised speech, Rubalcaba said bank profits should finance job creation and proposed reviving a tax on the wealthy, although he stressed he would maintain austerity measures to cut Spain's deficit.
Rubalcaba will have a tough time distancing himself from unpopular Prime Minister Jose Luis Rodriguez Zapatero, who cut spending and public wages over the past year and implemented labor market reforms to keep Spain from being sucked into the euro zone debt crisis.
The Socialists, in power eight years, trail the center-right Popular Party by 14 percentage points in opinion polls as voters are unhappy with the European Union's highest unemployment rate and the government's failure to revive the economy.
Rubalcaba is a highly respected political veteran but most voters see his opponent, PP candidate Mariano Rajoy, as a better manager for Spain's economy, which is struggling to recover from a huge property bubble that burst four years ago.
Elections must be held by next March but Zapatero, who remains in office until the poll, is widely expected to call an early vote, in October or November, so that Rubalcaba can take advantage of a summer economic upturn.
"It will soon be time to ask the banks to set aside profits to help create jobs," said Rubalcaba, 59, who stepped down on Friday from his job as deputy prime minister and interior minister to work on his campaign full time.
With one in five of the labor force out of work, he said jobs creation was paramount.
"We should think about bringing back the capital tax, not on the middle class but on the wealthy, who must help and collaborate with those who have suffered the most. That's my redistribution policy," he said.
HEALTH SYSTEM 'UNTOUCHABLE'
Zapatero has concentrated exclusively on reassuring investors who have sold off Spanish sovereign bonds, forcing up the country's borrowing costs.
"There are people who think that politics has lost the battle and that the markets run the show," Rubalcaba said, adding politicians must regain control.
He proposed euro zone bonds to fight back speculators, an idea already discarded by European policy-makers as they sought responses to the fiscal crises in Greece, Portugal and Ireland that have threatened to drag Spain to the brink.
Rubalcaba and other Socialist leaders began playing to leftist voters after their party was punished severely in May local elections because alienated leftist voters stayed away or turned to smaller parties.
He said Spain's much-admired public health system was "sacred and untouchable," and warned the opposition would try to privatize it. But he said some savings could be found through better management of hospitals and prescriptions.
The former sprinter and chemistry professor also acknowledged the demands of the "indignant" (indignados) movement that sprang up around the country in May in which mostly young protesters called on voters not to cast ballots for the Socialists or the PP.
He said he understood their call for electoral reform and proposed forming smaller voting districts to bring lawmakers more in touch with citizens' needs and demands.
(Additional reporting by Blanca Rodriguez; Editing by Peter Cooney)