* New Spanish leaders must act fast to win invester
confidence - analysts
* More political wrangling in Greece casts a pall
* Spain's People's Party looks set for absolute
By Fiona Ortiz and Lefteris Papadimas
MADRID/ATHENS, Nov 21 Spain's
newly-elected leadership must to act fast to shore up investor
confidence, analysts say, after the Socialist government became
the fifth in the euro zone to be toppled by the debt crisis.
In Greece, whose financial woes touched off the market
nervousness now felt around the world, more political wrangling
cast a pall over the new technocrat prime minister's bid to win
the nod from European leaders on Monday for bailout funds.
Borrowing costs for both Spain and Italy hit unsustainable
levels last week before the European Central Bank stepped in to
stabilise the market. On Friday, the euro rose but European
shares hit new five-week lows on fears it was a short-term fix.
Spaniards looked set to give the centre-right People's Party
(PP) an absolute majority in parliament and a clear mandate for
more austerity against a background of soaring unemployment and
one of the highest budgetary shortfalls in the region.
"We will stop being part of the problem and will be part of
the solution," PP leader Mariano Rajoy said after the vote.
Analysts welcomed the result while making clear they
expected Rajoy, who will not be sworn in until December, to move
quickly to turn the economy around.
"This could calm markets but until the new government does
what it says it is going to do, nothing will change," said Angel
Laborda, analyst at Madrid think-tank Funcas.
Nicolas Lopez, head of research at M&G Valores, said the
government had to introduce convincing measures. "While these
measures are being taken, the ECB will have to buy up bonds as
it has been doing to maintain confidence," he said.
In Italy, newly-installed Prime Minister Mario Monti easily
won confidence votes in both houses of parliament last week
after his predecessor Silvio Berlusconi quit to general relief
in European political and financial circles. But he could face a
battle to win backing for greater austerity or liberalisation.
Italian newspapers said on Sunday that new budget measures
were likely to be unveiled within two weeks, with a property tax
abolished by Berlusconi set to return, plus moves to tackle tax
evasion and a cut in payroll taxes to lift employment.
Greek Prime Minister Lucas Papademos will meet EU Commission
President Jose Manuel Barroso and Eurogroup head Jean-Claude
Juncker on Monday after EU, IMF and European Central Bank
representatives held tough talks in Athens.
Fearful of alienating voters, Antonis Samaris, head of
Greece's conservative New Democracy, refused to give a written
guarantee that he would do whatever it took to meet the terms of
a bailout no matter who wins an election expected on Feb. 19.
The leader of the far-right LAOS party said the
international lenders would not release the 8 billion dollars
Greece needs to avoid default in mid-December without the
Euro zone wide planning to improve the region's economic
governance and restore market faith in the single currency
project is also mired in disagreements.
The details of the European Financial Stability Facility
(EFSF), the bloc's rescue fund, are still undecided and the ECB
says it will not act as a lender of last resort.
The European Commission will propose much tighter control of
budgets on Wednesday and also present a study of three options
for joint debt issuance of the 17 countries sharing the euro,
but without any conclusions or suggestions which one to chose.