Scenarios - Spain's Zapatero unlikely to run again

MADRID (Reuters) - Spain's Socialist Prime Minister Jose Luis Rodriguez Zapatero is seen as unlikely to seek a third term as his popularity sinks due to high unemployment, tax increases and wage cuts.

Polls show the opposition Popular Party has a wide lead before a March 2012 general election and officials in the centre-right party have promised to deepen public spending cuts and fiscal austerity measures if they win.

Although he is expected to stay in power for the last year of his term, Zapatero has sacrificed his political future by imposing drastic measures to reassure investors that Spain's finances are stable and bring down soaring borrowing costs.

Zapatero, 50, says only his wife knows his decision. The Socialists are expected to do badly against the Popular Party in May local elections, opinion surveys indicate.

Under Spanish law and political tradition, Zapatero can serve out his term even if he does not run again. His conservative predecessor, Jose Maria Aznar, did that.

The Socialists can choose their candidate through a convention or a primary but have said they will respect Zapatero's personal decision and back him if he decides to run.

Here are scenarios of who could be the next Socialist party leader and candidate, how likely they are to win and the implications for economic policy.

PP VICTORY, DEEPENED REFORMS

Popular Party leader Mariano Rajoy gets low approval ratings -- he and Zapatero both get failing grades of three out of 10. Even so, polls show more and more Spaniards intend to vote for the PP. Rajoy is expected to deepen cuts in public administration spending and implement further structural reforms. Zapatero has cut spending without triggering massive social and labour union protests by persuading Spaniards he has no choice. But the PP is could face an intense social and union backlash if they make deeper spending cuts without an absolute majority in Congress.

To some extent the Socialists have stolen the PP agenda through austerity measures and market-friendly reforms. Rajoy has criticised Zapatero's reforms as belated, improvised and at times haphazard.

POPULAR RUBALCABA LIKELY TO RUN

Deputy Prime Minister Alvaro Perez Rubalcaba, 59, a tough interior minister, is the most likely person to run for the Socialists, party colleagues say. He is respected and has one of the highest approval ratings of any politician in Spain, 5.23 out of 10. Polls show the Socialists would narrow the gap with the Popular Party with Rubalcaba as their candidate and could prevent the PP from getting an absolute majority in Congress.

"Rubalcaba would limit the damage," said one Socialist government member.

However, some say a Rubalcaba candidacy would break with tradition since he's from an older political generation and the Socialists in Spain have tended to pick younger leaders. So far, he has managed to maintain his popularity despite his role as Zapatero's enforcer, but that could erode in the coming months.

If elected, Rubalcaba would be likely to continue Zapatero's piecemeal reform agenda which has warded off market attacks on Spanish government debt.

ZAPATERO RUNS AGAIN ON SUICIDE MISSION

If the Socialists calculate that they will lose no matter who runs, Zapatero might run again so as not to burn out a potential rising star. This scenario could come into play if Rubalcaba declined to enter a race he saw as hopeless. However, the risk would be that it could hand the PP an outright majority in parliament.

SOCIALISTS FIELD ALTERNATIVE CANDIDATE

The Socialists could field an alternative, next-generation candidate who is not as close to Zapatero as Rubalcaba and therefore seen as less contaminated. Defence Minister Carme Chacon, 39, has high name recognition according to recent polls and might fit this profile. Other names mentioned in Spanish media include Public Works Minister Jose Blanco, 49, and Socialist Party organisation secretary Marcelino Iglesias. 59.

PP FIELD ALTERNATIVE CANDIDATE

Given its double-digit lead in the polls, the Popular Party is seen as unlikely to abandon Rajoy as a candidate despite his consistent poor approval ratings. Opinion polls show he gets low scores for honesty and capacity for dialogue, but voters give him better marks than Zapatero in the areas of vision for the future and management capacity.

(Editing by Paul Taylor/David Stamp)