Spanish Socialists win short of majority

By Jane Barrett

MADRID (Reuters) - Spain's governing Socialist Party won Sunday's election but fell short of the absolute majority that might have helped them act more quickly to cushion an economic slowdown.

"I will govern for all people, thinking first of those who have nothing," Prime Minister Jose Luis Rodriguez Zapatero told thousands of supporters cheering and waving red flags outside the Socialist headquarters.

With 96 percent of votes counted, the Socialists were projected to win 169 seats in the 350-seat lower house, up five from the previous legislature.

The conservative Popular Party (PP) won 153 seats, also up five from 2004, when voters turned against them after they rushed to blame the Basque separatists of ETA for election-eve train bombings that turned out to be the work of Islamists.

The night's big losers were small left-wing parties.

"We're the political party that gained more seats than any other in Spain, in votes and in percentage," PP leader Mariano Rajoy told supporters.

The economic slowdown and a sharp rise in unemployment dominated the election campaign until Friday, when a former Socialist councillor was shot at point-blank range in the Basque Country. Both main parties blamed ETA.

Zapatero, 47, started his victory speech remembering the five deaths attributed to ETA since it ended a ceasefire in December 2006 after he had made peace overtures.