José Luis Rodríguez Zapatero, the Spanish Prime Minister, yesterday won a second term after a bitter election campaign overshadowed by the brazen killing of a politician in its final hours.

The Socialist leader managed to overcome fears over rising prices, a deflating property bubble and a slowing economy to secure a new, four-year mandate to rule Spain.

In doing so he put an end to questions over his legitimacy posed by the opposition Popular Party, which has said that he won the 2004 election only because of the Madrid train bombings three days beforehand.

“The Spanish people have spoken clearly and decided to begin a new era,” Mr Zapatero told jubilant supporters outside the party’s headquarters in Madrid last night. “I will govern with a firm but open hand . . . I will govern for all, but do so thinking most of all of those in need.”

He also paid tribute to Isaías Carrasco, the Socialist Party councillor shot outside his home in Mondragón on Friday, apparently by Eta, the Basque separatist group. “Isaías should be here to witness this moment, alongside his family,” Mr Zapatero said, to roars of approval. “We feel the absence of all victims of terrorism. They live on in our memory.”

Though Mr Zapatero successfully fought off a blistering assault by the Popular Party, which branded him a “liar” and accused him of “betraying the victims of terrorism”, his Socialist Party failed to secure an absolute majority in parliament.

With 97 per cent of the votes counted, the ruling Socialists had secured a 43.7 per cent share of the vote, against the Popular Party’s 40.1 per cent. The slender majority will force Mr Zapatero to seek the support of other groups to govern, presaging weeks of horse-trading with small nationalist parties in the Basque Country or Catalonia.

Political parties abruptly halted their campaigning on Friday in shock at the slaying of the former Socialist councillor and paid their respects to the victim’s family. But the councillor’s wake soon erupted in recriminations over the way that the Popular Party had exploited the issue during the campaign.

Mr Carrasco’s family refused initially to allow Mariano Rajoy, the conservative leader, to approach his coffin. They relented, but a Socialist Party leader told Mr Rajoy that he wanted never to hear him repeat accusations that the Socialist Party had betrayed the victims of terrorism. Mr Rajoy left without paying his respects to Mr Carrasco.

On Saturday Mr Carrasco’s daughter, Sandra, 20, made an emotional appeal for Spaniards to show their defiance of her father’s killers by going en masse to the polls.

The apparent return by Eta to political assassinations should have, in theory, played to the Popular Party’s strengths, as it has made the Prime Minister’s ill-fated peace talks its main theme in opposition. But that Eta killed a Socialist activist militated against the Opposition’s argument that the Government had “surrendered” to Eta.

The group, which has killed more than 800 people in its four-decade quest for an independent Basque homeland, has been severely weakened by arrests in France and Spain. That it resorted to shooting a former local councillor with no protection to make itself heard was widely seen as a sign of its weakness.

Mr Zapatero scored a surprise election win over Mr Rajoy in the previous elections on March 14, 2004, amid the shock of train bombings in Madrid that killed 191 people. His new victory is a further blow to the Popular Party that regarded his first win as illegitimate, and will almost certainly trigger a leadership battle.

Mr Zapatero’s first term was marked by angry battles with the Roman Catholic Church over liberal social reforms, including legalising same-sex marriage, fast-track divorce and making religious education optional in state schools.

During the election campaign he pledged to spend more time worrying about the economy which is sharply decelerating after 14 years of strong growth. He has hinted that he may also take more of an interest in world affairs after a first term focused almost entirely on domestic matters.

As one Spanish diplomat joked: “Spanish prime ministers tend to start their job worrying about Soria [a city deep in the Spanish heartland] and end up worrying about Syria.”

Mr Zapatero’s first task will be to deal with the fallout from a sharp economic slowdown, caused by the US sub-prime mortgage crisis and a huge glut of supply in the housing market. The construction industry, which accounts for a fifth of the Spanish economy and is one of its main employers, has virtually ground to a halt.

Inflation has also picked up sharply, eating into Spaniards wage packets. Mr Zapatero will begin his second term by trying to negotiate a broad agreement between trade unions and employers to tackle Spain’s mounting economic problems.

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