Spanish Prime Minister Jose Luis Rodriguez Zapatero, his popularity hammered by the euro zone's highest jobless rate, said on Saturday he would not seek a third term in 2012 elections, his Socialists are expected to lose.
Popular Deputy Prime Minister Alfredo Perez Rubalcaba and Defence Minister Carme Chacon are seen as possible successors to revive the ruling Socialists, who trail the centre-right opposition Popular Party by up to 15 points in opinion polls.
"I will not be a candidate in the next general elections," Zapatero told the Socialist's Federal Committee meeting. The announcement was widely expected and there had been intense speculation it would come this weekend.
Zapatero, in office since 2004, saw his popularity plunge as he imposed spending cuts and economic reforms to keep Spain from spiraling into a fiscal crisis and following Greece and Ireland into a European Union bailout.
The euro zone's fourth largest economy came under attack in bond markets after a real estate bubble burst in 2008, causing a recession and 20 percent unemployment. Spain's recovery has lagged behind the rest of Europe.
The Popular Party has pledged to deepen spending cuts and trim what it says is more fat from public administration if it comes into power next year. Polls show the PP winning general elections if they were held now, even though PP leader Mariano Rajoy is not much more popular than Zapatero.
The PP also is expected to do well in local and regional elections on 22 May. The Socialists hope that Zapatero's announcement to step aside will help the party regain some credibility so they can recover some votes in those May elections.
Zapatero's decision triggers primaries for a new party leader, a process which will be up to the Federal Committee to decide, Zapatero said. But these primaries will not take place before local and regional polls in May, he said.
The succession issue could shift focus away from the government's commitment to push ahead with much needed reforms to stabilise public finances and ensure Spain meets its deficit targets, an economist said.
"I dont think Zapatero's announcement will spark confidence. A period of uncertainty and doubt has now opened up with the succession issue, which has a political cost," said Santiago Carbo, Economy Professor at the University of Granada.
Rubalcaba, 59, is one of Spain's most popular politicians and is seen as a frontrunner for primaries.
At this time his only serious rival is 40-year-old Defence Minister Chacon, who would fit as a younger face to remodel the party.