Prime Minister Mariano Rajoy’s conservative People’s Party won the election in Spain on Sunday, according to exit polls, but it fell short of an overall majority, raising the prospect of coalition government in a country that has only seen one-party rule since democracy was restored.

Rajoy’s victory was predicted by the opinion polls, but it was bittersweet. Although the conservatives took a plurality of the seats, it was their worst national election result in decades.

Defections

The second largest Socialist Party did not do much better, winning around 22 percent support, down almost 7 points from the last election.

Many leftwingers switched to the anti-establishment Podemos, which exit polls showed doing better than expected to become the third largest party.

The liberal Ciudadanos — expected to be the kingmakers in the new Congress — would come in fourth, giving a coalition between the two center-right parties 174 seats when 176 are needed for a majority.

A left-wing alliance between the Socialists, Podemos and former communists would also fall short, with the balance going to smaller regional parties.

Economic woes

Rajoy had waited until the last possible moment to dissolve Congress this year, hoping that an improving economy would give his party a fighting chance in the election.

After years of malaise, Spain is finally showing signs of recovery. Growth is expected to come in at 3 percent this year, one of the highest rates in the industrialized world. Business and consumer confidence are improving. Unemployment is coming down.

But one in five Spaniards is still out of work. Youth unemployment is almost 50 percent. Many workers haven’t seen a pay raise in years.