In Spain, left-wing coalition gains ground as king ends talks

MADRID (Reuters) - The prospect of a left-wing coalition government in Spain gained ground on Friday as anti-austerity party Podemos said it was ready to help break the deadlock created by an inconclusive election in December and back a Socialist-led administration.

Such a government remains an uncertainty for now, however. Not only would it need several leftist parties to agree on a joint program but also the backing of regional groups from the Basque Country and Catalonia, which will not be easy.

The leader of Podemos, Pablo Iglesias, made the offer after meeting with King Felipe, who will now discuss the formation of the next government with the heads of the Socialists, Pedro Sanchez, and the conservative People's Party (PP), acting Prime Minister Mariano Rajoy.

The monarch is still expected to propose Rajoy, whose PP won most seats but failed to gain an outright majority in the Dec. 20 vote, as a candidate for prime minister shortly afterwards.

While Rajoy is set to lose the subsequent parliamentary vote on his appointment as most parties have already said they would reject him, the move would set the clock ticking and open a two-month maximum period for the formation of a government.

It would also increase pressure on Sanchez, who will get the next shot as candidate for the job, as a new election would likely have to be held in May if he fails to obtain a majority.

Sanchez, who opposes the "grand coalition" of centre-left and centre-right parties proposed by Rajoy, has already said he was in favour of reaching an agreement with Podemos and other smaller groups to obtain a majority of "progressive forces".

That will not be easy however as Podemos, which relies on strong regional affiliates, especially in Catalonia, has pledged to organise a referendum on the independence of the wealthy northeastern region, which the Socialist's reject.

The two parties softened their respective stance on the issue this week and insisted they wanted to focus on economic and social issues rather than on the Catalan question.

"NO RED LINES"

Iglesias stopped short of calling again for a referendum on Friday and said he would go to the talks with the Socialists and other parties with an open mind.

"Spain can't allow to wait for Rajoy," Iglesias told a news conference. "We will talk of governments, teams and tasks and we will not debate with any red line".

The fragmented election has thrust Spain into a situation unprecedented in the four decades since the return of democracy.

The PP and the Socialists, who have alternated in power over the last 40 years, came first and second but with greatly reduced support. Two new parties, Podemos and the centrist Ciudadanos, attracted a new generation of voters disillusioned with the old elite.

If Sanchez fails to be voted in as prime minister, it is not clear yet whether Rajoy would try again or the parties would directly seek a new election within the following two months.

Ciudadanos leader Albert Rivera said on Thursday his party was ready to abstain in favour of Rajoy or Sanchez to avoid a new election and provide institutional stability at a time when the Spanish economy - the European Union's fifth-largest - is recovering from its worst crisis in decades.

But he criticised Podemos on Friday for calling on other parties to recognise that Spain is a state formed by several nations, including Catalonia, whose regional government favours secession, raising doubts about a potential abstention.

A majority of Spanish voters oppose holding another election to resolve the political stalemate and want parties to agree on a coalition government, a survey showed on Sunday.

(Additional reporting by Blanca Gonzalez; Editing by Angus MacSwan)