Spain's centre-right Popular Party (PP) has won a landslide victory in Sunday's elections, seizing an absolute majority of seats in parliament in a vote dominated by economic concerns and the eurozone debt crisis.
The Socialists, who have governed the country since 2004, conceded a humiliating defeat as official results showed the PP projected to take 186 seats in the 350-seat lower house, with 98 per cent of votes counted.
The Socialists plummeted from 169 to 111, their worst performance ever, as voters punished the party of Jose Luis Rodrigues Zapatero, the outgoing prime minister, over its failure to tackle high unemployment in the eurozone's fourth largest economy.
Addressing celebrating supporters, Mariano Rajoy , the leader of the PP, said: "I would like to say to all those who have not voted for us that I am prepared to do and to be the prime minister for everyone, for all Spaniards. I will fight against the public deficit and debt and also against unemployment.
"We are now going through a very difficult time. We are in a crossroads which will determine the future of Spain, not just in the coming years but in the coming decades.
"In these difficult times, people's commitment is tested. We have to take chances. We have to be innovative ... We have to express solidarity."
The PP has vowed to tackle the debt crisis that is threatening the economy, but it has offered scant details on how it plans to execute the task.
Rajoy vowed to make cuts "everywhere", except for pensions, in order to meet Spain's target of cutting its public deficit to 4.4 per cent of gross domestic product in 2012 from 9.3 per cent last year.
Conceding defeat, Alfredo Perez Rubalcaba, the Socialist party candidate, said: "We are going to do our best so that the crisis does not lead to a loss of our rights.
"We are going to defend the public services, equality, fairness between men and women, and all our civil rights and freedom."
Sunday's vote saw Spain become the third southern European eurozone nation to change its government in recent weeks, after governments in Greece and Italy collapsed under the strain of the debt crisis. Both of those countries currently have interim governments, headed by non-elected prime ministers.
The political shift did not invoke confidence in financial markets as Spanish government borrowing costs rose to .
In the first day of trading following Sunday's vote the yield on Spanish government bonds rose to 6.500 per cent in late morning trading. Monday's bond yield represents an increase of nearly two percent from Friday's rate of 6.345, pushing the nation closer to the seven per cent mark, which led Portugal and Greece to seek bailouts earlier this year.
Ireland and Portugal, which like Greece received huge bailouts to avoid default, have also seen their governments change hands because of the crisis.
'Has to be a change'
Though considered uncharismatic, Rajoy won support from voters lured by his promise to fix the economy and create jobs, even at the cost of tough austerity measures.
Octavio Arginano, a retired 67-year-old factory worker, said he had voted for the right for the first time in his life.
"My son has been unemployed for over a year, my daughter earns just 600 euros ($800) a month looking after young children," he said, as he left a polling station in the Madrid neighbourhood of Lavapies.
"There has to be a change although I am not sure anyone knows what to do to get us out of this situation."
Analysts say Rajoy, who will be sworn in from December 20, must quickly impose reforms to reassure world markets with Spanish borrowing costs already higher than six per cent.
Spain's risk premium - the extra interest rate investors demand to buy Spanish compared with safe-haven German debt - shot to a euro-era high of more than 500 basis points in the days ahead of the vote.
Zapatero's government was blamed for reacting late to the 2008 property market implosion, which combined with a global financial crisis to throw millions out of work.
As his government battled to cut back spending and avoid a disastrous loss of confidence by the debt markets, it cut public sector wages by an average 5.0 per cent, froze pensions and raised the retirement age from 65 to 67.
A nationwide protest movement erupted in May 2011 to vent anger over the high jobless rate and political corruption.
Hundreds of "indignant" protesters rallied in Madrid in the days before the election and analysts say many more may flood the streets next year if the cuts go even deeper.