The Spanish government called a General Election, firing the starting gun on a campaign widely expected to be one of the most fiercely contested in the country's 30-year democratic history.

With less than two months to go until the March 9 vote, opinion polls show that the Prime Minister, José Luis Rodríguez Zapatero, 47, is facing a tough fight to secure a second term in office. His Socialist Party's lead over the conservative Popular Party in Opposition has shrunk to only three percentage points, according to the latest study by Instituto Opina, released yesterday.

Government strategists take heart in poll data showing that the Prime Minister remains personally far more popular than his principal opponent, Mariano Rajoy, 52. The Leader of the Opposition has long received low marks for likeability, despite recent efforts by image-makers to give the bearded and bespectacled politician a makeover.

The candidates have agreed to participate in two televised debates, the first in a Spanish national election since 1993.

Analysts expect Spaniards to vote first and foremost with their pocketbooks. “The economy is going to be one of the biggest issues in this election,” said Josefina Elías, director of the polling firm Instituto Opina.

The economy expanded rapidly during Mr Zapatero's four-year term in office, extending an uninterrupted, 15-year growth spurt. But dark clouds are forming on the horizon, something the Opposition is doing its best to exploit. Inflation is picking up, hurting household budgets; house prices are also starting to slip after a decade-long boom.

And the global credit crunch has led to worries that Spain's heavily indebted companies and households are heading for an unpleasant shock in 2008. Even so, the Spanish economy is projected by experts to grow next year, if at a far slower pace than Spaniards have become used to.

Another issue certain to make an appearance in the campaign is the Socialist Government's contentious relationship with the Roman Catholic Church. Spanish Bishops have blasted Mr Zapatero for his liberal social policies on issues such as divorce, abortion, same-sex marriage and religious education in schools. But the Church's influence on Spaniards' voting choices is not what it was: only 18 per cent go to church every Sunday in what was once a devoutly Catholic country.

One of the greatest wild cards in the Spanish election is how a terrorist attack would affect the outcome. During the last election, Mr Zapatero benefitted from outrage over the previous Government's handling of the Madrid train bombings just three days before. The conservative government in power at the time tried to pin the outrage on Eta, the violent Basque separatist group, despite mounting evidence that it was the work of Islamic extremists.

This time, however, Mr Zapatero appears politically vulnerable to an attack by Eta. He took a big personal gamble by trying to negotiate a peace deal with the group. That backfired when Eta resumed its campaign of violence, killing two people in a bomb attack on Madrid airport in December 2006.

Spanish security services say that they have foiled a series of Eta attacks in recent months. But the group appears determined to strike before the election to demonstrate it is not a spent force.

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