WRAPUP 1-Spain PM calls early poll hoping for jobs recovery

* PM Zapatero calls Nov election, 4 months early

* PP conservative oppostion widely expected to win

* Timing would leverage Socialist poll uptick, better data

* Socialists' Rubalcaba could attract greater share of vote

* Moody's to review Spain for debt downgrade

(Recasts, adds details, analyst comment)

By Carlos Ruano

MADRID, July 29 (Reuters) - Spain's prime minister called early elections on Friday, gambling that a summer jobs boom may allow his Socialists to snatch victory despite economic stagnation that has contributed to the euro zone's debt crisis.

Although polls suggest the conservative opposition will easily win the Nov. 20 vote, called four months early, Jose Luis Rodriguez Zapatero's Socialists have narrowed the gap in recent months as the economy begins to show faint signs of recovery.

"I believe the moment has arrived to announce a general election ... which will be held on November 20," Zapatero told a news conference on Friday. Deeply unpopular, he announced earlier this year that he would not run again.

Most economists expect strong employment figures during the tourism season, a key driver of the Spanish economy, which could allow the Socialists to further narrow the gap with the conservative Popular Party (PP).

The Socialists are now just seven points behind in the a leading poll, down from a 10 percentage point lead in April, an improvement they hope will be confirmed by third quarter unemployment data Oct. 28, a month ahead of the vote.

Zapatero's Socialists haemorrhaged support after being forced to impose a range of austerity measures to rescue public finances and fight a rearguard action from investors over its debt, which fed into the broader euro zone crisis.

Spanish debt has again been in the firing line on financial markets after a review for possible downgrade from credit rating agency Moody's on Friday.

It cited weak growth and hefty regional spending as key challenges for the euro zone's fourth largest economy, struggling with Europe's highest jobless rate.

The PP's leader Mariano Rajoy, who could win November's poll by a wide margin, has pledged his conservatives to implementing austerity if they win.

But Rajoy could see his plans set back if the Socialists' candidate, former Interior Minister Alfredo Perez Rubalcaba, continues to narrow the gap between the parties.

The poll also showed that Spaniards rate Rubalcaba as more efficient, honest and better at dialogue than Rajoy.

MORE UNCERTAINTY?

"I don't believe this constitutes any kind of game changing event for the Spanish economy and where reforms are concerned. Anything that turns the spotlight on political risk in Spain is negative," Nicholas Spiro, head economist at Spiro Strategy, said.

The premium investors demand to hold Spanish over German debt had risen by around 12 basis points since the announcement to 357 bps, close to euro-era highs.

A long history of fiscal devolution between the central and regional governments could complicate matters if the new government does not have a large majority, he argued.

Unpopular Zapatero has long been considered a weak leader and the Socialists badly lost a May regional election.

"I'm not convinced an election alone, even if it creates a fairly stable new government, will calm down markets" said David Bach, an economist at IE business school.

Political commentators had widely speculated that the Socialists could take advantage of improved poll ratings to call an early election, although many had expected an announcement after the traditional August holiday period.

The date chosen for the election is controversial as the day Fascist dictator Francisco Franco, who ruled Spain for three decades, died.

(Additional reporting by Madrid newsroom; Writing by Elisabeth O'Leary; Editing by Jon Boyle)