Spain's victorious Socialists turn to economy

By Jason Webb and Andrew Hay

MADRID (Reuters) - Fresh from a second consecutive election victory, Spain's Socialists began to prepare a public works program on Monday to reinvigorate a flagging economy.

Prime Minister Jose Luis Rodriguez Zapatero, who boosted his tally of parliamentary seats but once again fell short of an absolute majority, said he would approach smaller parties to forge alliances.

"There are a number of parties we can speak to," an exhausted-looking Zapatero told a news conference.

"Obviously we're going to be talking to all of them," he said, without specifying whether he would be seeking a permanent alliance or simply continue as he has over the past four years, with different deals for different legislation.

The Socialists gained five seats for a total of 169 in the 350-seat parliament. The opposition conservative Popular Party (PP) also gained five seats to reach 153, while smaller left-wing parties and some nationalist parties lost ground.

Sunday's turnout was a high 75 percent, in an election overshadowed by the assassination of a former Socialist councilor in the Basque Country, blamed on ETA rebels.

Participation almost matched that of 2004, when voters galvanized by the PP government's mishandling of an Islamist attack on Madrid trains handed the Socialists a surprise win.

Zapatero on Sunday promised to govern for the poor, women and the young, continuing the progressive note of his first term, during which he legalized gay marriage and made divorce easier in the once deeply Roman Catholic country.