Prime Minister Of Spain Faces Troubled Times

MADRID, Spain — Forget about savoring victory. Spain's freshly reelected Socialist prime minister begins a second term facing immediate challenges from a slumping economy and surging violence by the Basque separatist group ETA. Although he was cheered by emerging from Sunday's election with a bigger cushion in parliament, Jose Luis Rodriguez Zapatero must quickly deal with growing unemployment, rising inflation, and a booming real estate market that suddenly went flat.

That's a big change for the prime minister. After his first election victory in 2004, he inherited one of Europe's economic success stories, with year after year of robust growth that consistently outperformed richer neighbors.

The boom started to evaporate about six months ago, as Spain's red-hot construction sector — the main engine of the growth — went into a slump and fallout from the sub-prime mortgage crisis in America hit Spain. Economists say annual growth, which has averaged nearly 4% for more than a decade, will drop to perhaps half that by year's end.