By Jason Webb and Andrew Hay
MADRID (Reuters) - Fresh from a second consecutive electionvictory, Spain's Socialists began to prepare a public worksprogramme on Monday to reinvigorate a flagging economy.
Prime Minister Jose Luis Rodriguez Zapatero, who boostedhis tally of parliamentary seats but once again fell short ofan absolute majority, said he would approach smaller parties toforge alliances.
"There are a number of parties we can speak to," anexhausted-looking Zapatero told a news conference.
"Obviously we're going to be talking to all of them," hesaid, without specifying whether he would be seeking apermanent alliance or simply continue as he has over the pastfour years, with different deals for different legislation.
The Socialists gained five seats for a total of 169 in the350-seat parliament. The opposition conservative Popular Party(PP) also gained five seats to reach 153, while smallerleft-wing parties and some nationalist parties lost ground.
Sunday's turnout was a high 75 percent, in an electionovershadowed by the assassination of a former Socialistcouncillor in the Basque Country, blamed on ETA rebels.
Participation almost matched that of 2004, when votersgalvanised by the PP government's mishandling of an Islamistattack on Madrid trains handed the Socialists a surprise win.
Zapatero on Sunday promised to govern for the poor, womenand the young, continuing the progressive note of his firstterm, during which he legalised gay marriage and made divorceeasier in the once deeply Roman Catholic country.
SPENDING FOR GROWTH
But with Spain's long economic boom slowing sharply sincethe global credit crunch bit late last year, his first prioritywill be to put the lid on unemployment, which rose by 50,000 inFebruary alone to 2.3 million.
In an interview on Monday on television channel Telecinco,Zapatero was asked about sharp increases in unemployment amongimmigrants from the construction sector, and he said he wastalking to companies and trade unions about joblessness.
Building firms are shedding jobs at the end of adecade-long housing boom and high numbers of immigrants work inthe sector.
"We are working on a specific plan for people who lose jobsin the construction sector," Zapatero said, without givingdetails.
The government has said in the past that it expects othersectors of the economy to expand and absorb workers laid offfrom the construction sector.
Earlier, Labour Minister Jesus Caldera said Spain's budgetsurplus would allow it to fund public works programmes.
"They know they have to do something quickly ... The darkclouds have gathered, the question is how hard it will rain,"said Martin Van Vliet, chief economist at ING Amsterdam.
The government hopes increased spending will keep economicgrowth at 3 percent after 3.8 percent expansion last year, butsome private economists, worried by high levels of debt in bothhouseholds and firms, fear it could fall as low as 2 percent.
Analysts also point to the long-term economic problems of acountry that for years has relied on the construction boom andballooning private sector debt for growth.
The private debt load is reflected by a current accountdeficit running at nearly 10 percent of gross domestic product.
Economists say Spain badly needs to make its exports moreattractive and encourage inward investment in sectors otherthan property, notably by improving productivity as well asinfrastructure and education.
"They're all focused on giving the economy a boost, a muchneeded boost, but it shifts focus away from reforms in thecontext of a huge current account deficit. It's a worryinglonger term risk," said Van Vliet.
The Barcelona newspaper La Vanguardia reported thatSocialist officials had already met representatives of themoderate Catalan nationalist party Convergencia i Unio to talkabout a possible deal. CiU, which won 11 seats, declined tocomment.
CiU would almost certainly want a bigger share of taxrevenues for the wealthy Catalonia region.
"They (the Socialists) are seven seats away from anabsolute majority. They can pick and choose their allies on anad hoc basis," said Charles Powell, of San Pablo-CEUUniversity.
In the last parliament, Zapatero often relied on UnitedLeft and the left-wing Catalan nationalists EsquerraRepublicana, who were punished at the polls this time.
(Additional reporting by Andrew Hay and Sarah Morris;Editing by Kevin Liffey)
