|Zapatero (L) plunges in popularity as he fights an economic crisis [Reuters]
Spanish Prime Minister Jose Luis Rodriguez Zapatero, plunging in popularity as he fights an economic crisis, has announced he will not seek a third term in 2012 elections.
"I will not be a candidate in the next general elections," Zapatero said in a televised speech to the party's federal assembly in Madrid on Saturday.
He called on the party to hold an internal primary to elect a new person to lead the party in the general elections scheduled for March 2012.
Zapatero said that process should begin after regional and municipal elections on May 22, polls in which the Socialist Party (PSOE) is expected to suffer heavy losses.
His announcement followed months of speculation that the 50-year-old leader might not seek re-election.
He said that when he was first elected in 2004 he had already intended to remain head of government for only two terms.
"I had thought about this seven years ago, two terms are enough," he said.
Deputy Prime Minister Alfredo Perez Rubalcaba, 59, one of the most powerful figures in the government, is the most likely candidate to succeed Zapatero as Socialist Party leader, according to analysts.
The prime minister last October promoted Rubalcaba to be his deputy in what Spanish media saw as a move to position him as successor.
Analysts said Zapatero's decision not to run again was aimed helping the PSOE both in the regional and municipal elections in May as well as in next year's legislative polls.
But Defence Minister Carme Chacon, 40, who has had a meteoric rise through the party, also has strong support.
Fermin Bouza, an analyst at Madrid's Complutense University, said "Rajoy's biggest chance of winning would be against Zapatero".
He predicted "an agreement under which Rubalcaba would stand now (in 2012) and Chacon in the following elections (in 2016), avoiding a terrible fight in the primaries".
The conservative opposition Popular Party said the government should call elections immediately as "Spaniards must decide now".
The PSOE has slumped in the opinion polls against the PP, led by Mariano Rajoy, as Zapatero attempts to push through painful austerity measures and labour market reforms to trim the public deficit and slash unemployment.
The Spanish economy plunged into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once booming property market.
The economy shrank 0.1 per cent in 2010 and the unemployment rate ended the year at 20.33 per cent, the highest level among industrialised countries.
The government is seeking to reassure markets worried that its public deficit is unsustainably high and that Spain could follow Greece and Ireland in seeking a debt bailout.
The Bank of Spain warned on Wednesday of slower-than-expected growth ahead and predicted the country would miss its key public deficit targets this year and next.
Zapatero said on Saturday that the government had "a clear action programme for the remainder of the term" to overcome the crisis and promote economic recovery and job creation.
Zapatero first took office in a surprise election win over Rajoy on March 14, 2004, just three days after Madrid train bombings killed 191 people.
He drew support from many Spaniards who accused the conservatives of attempting a cover-up by insisting the Basque separatist group ETA was to blame even though evidence pointed to Islamic extremists angered by Madrid's role in Iraq.