Spain's Socialist name party leader Sanchez candidate in race for PM

Sanchez, 43, a telegenic parliamentarian, took the reins in July last year after a crushing defeat to a new anti-austerity party in a European Parliament vote caused the previous leader, Socialist veteran Alfredo Perez Rubalcaba, to step down.

Support for the Socialists has plummeted since they ceded power to the conservative People's Party (PP) at the end of 2011 after two terms which oversaw one of the country's worst economic downturns in history.

A burst housing bubble in 2008 sent the country's economy into a near 6-year slump which has left one in four workers out of a job and the Socialists have been harshly criticised on how they handled the crisis.

Meanwhile, the governing PP has been badly damaged by a slew of corruption scandals and most Spaniards say they are not feeling an economic recovery on which Prime Minister Mariano Rajoy is pinning his own election hopes.

Political parties in Spain do not necessarily put forward the party leader to run for prime minister, though Sanchez has received strong backing among the Socialists to run as their candidate.

"Spanish society continues to face two problems which drain its strength. Two challenges which I am committed to eradicate: unemployment and corruption," Sanchez told supporters in his acceptance speech.

Deep rooted dissatisfaction with austerity-driven policies and corruption has given rise to new political groups which has shattered the two-party system that has dominated Spanish politics for decades.

Sanchez has managed to stabilise sliding support for his party since taking the helm but it has been at a low level as voters turn to newcomers including the left-wing Podemos ("We Can") and the market friendly Ciudadanos (Citizens).

In a poll published on Sunday, Sanchez came second amongst the most favoured politicians behind Ciudadanos's leader Albert Rivera, while Rajoy tailed the list alongside other PP party faithful.

However, the Socialist leader will need to work hard to regroup his own party, which many believe lacks a strong team to run for the election, while finding allies in an increasingly fragmented political landscape.

After the PP took a battering in municipal and regional elections end-May, the Socialists were forced to forge alliances, including in conservative strongholds Madrid and Valencia, with the new parties, to take power.

(Reporting by Paul Day; Editing by Rosalind Russell)