Spanish parties promise to ease economic pain

MADRID, Jan 27 (Reuters) - Spain's ruling Socialists on Sunday promised income tax rebates for all Spaniards should they win a March 9 general election.

The 5 billion euro ($7.33 billion) giveaway countered opposition proposals on Friday for income tax cuts and exemptions to head off a steep slowdown in Spain's economy.

Prime Minister Jose Luis Rodriguez Zapatero said households were feeling more pain as inflation and credit costs soared at the end of a decade-long housing boom.

He offered 13 million workers a one-time, 400 euro tax cut in June and said his Socialist government could afford the rebate after it ran Spain's first budget surplus in three decades.

"There are families who are facing greater difficulties from rising prices, rising mortgage payments, and so I'm committed to making this rebate," Zapatero said. "This is meant to stimulate the economy."

The Socialists' lead in polls over the conservative opposition Popular Party has narrowed to within two points since December when inflation hit a 12-year high and unemployment rose to one of the highest rates in the European Union.

Zapatero accuses the opposition of being unpatriotic and harming investor confidence for suggesting Spain's credit-driven economy is now vulnerable an abrupt slowdown.

Mariano Rajoy, leader of Spain's conservative opposition Popular Party, on Sunday said Zapatero was burying his head in the sand.

"Rodriguez Zapatero is hiding the real economic situation," Rajoy said in an interview published in the El Mundo newspaper on Sunday.