ALMERIA, Spain (Reuters) - An election on Sunday in Spain's Andalusia region, where one in three people are out of work, is an early test of how deeply the anti-austerity sentiment that brought Syriza to power in Greece has taken root across Europe's southern rim.
Andalusia is the first of three local votes leading up to a year-end national election that will measure sentiment in a country often hailed as a model of European economic recovery at the hands of German-inspired spending cuts and reforms.
However, people are still suffering the effects of a recession that has cut national output by close to 7 percent between 2008 and 2013 and sent many into poverty.
Spain's political scene - a centre-left and centre-right bi-party system built when the Franco dictatorship ended in the 1970s - is now being upended by populist forces that are making inroads with the disaffected population.
Andalusia is a window into the broader forces at play.
The incumbent Socialist Party is expected to grab a narrow victory in Sunday's election for a regional parliament, in which 6.5 million people - 20 percent of Spanish voters - are eligible to cast a ballot.
Yet a depressed job market and corruption scandals involving the party, including one over the alleged misuse of funds earmarked for the unemployed, mean the Socialists could register their worst result since they began to rule the region in 1982.
Instead, upstarts Podemos and Ciudadanos - which have never held any seats in Andalusia - are expected to make major headway, jointly securing a quarter of the popular vote to become regional king-makers in the local parliament.
According to the polls, most of the votes will be taken away from the conservative Popular Party of Prime Minister Mariano Rajoy, who cut massively on health and education spending and also battled with corruption cases in his party nationally.
"Expect a surprise on the upside," said Lucia Ayala, the Podemos candidate for the Andalusia's southeastern province of Almeria. "We're really getting traction. People from all sides are approaching us."
The main reason is jobs. Almeria, for example, produces 25 percent of the tomatoes in Spain and attracts hoards of tourists to its sun-kissed beaches. Yet the local unemployment rate in is 35 percent. It goes as high as 60 percent for non-studying 20-25-year-olds.
Almeria's Old City, a blend of classic and moorish architecture, has a depressed air, with many shops having closed during the crisis.
In Vicar, a working-class town on the outskirts, groups of youths hung around the pot-holed streets.
"Before, anyone could get a job quickly in the tomato fields or warehouses. But today it's mission impossible," said Francisca Gonzalez, a 71-year-old pensioner from Vicar.
"We hope the election will bring changes in our daily lives, and jobs for young people."
The importance of Andalusia's elections has been evident over the past few weeks as national leaders have travelled from Madrid to help their local candidates. Rajoy made five trips to the region in just a month.
Teneo Intelligence analyst Antonio Barroso said the regional election was a presage of the unstable national politics that Spain is set to experience this year.
Elections in other regions and for town halls will take place on May 24, while Catalonia will hold its own regional vote on Sept. 27.
Local politicians say the most likely scenario in Andalusia is that the Socialists will form a minority government.
Neither the Socialists or the PP will want to agree on a grand coalition before the national election because it would hurt them. Nor would Podemos or Ciudadanos want to appear to be becoming part of the establishment, they said.
The effect of highly fragmented parliaments in the region - and overall in Spain after the national election - is a concern for incumbent parties but also possibly for investors. A stable government in Madrid would reassure them that Spain's accelerating economic recovery will not be derailed.
"The emerging political fragmentation is likely to become a problem for political stability and the policy outlook," said Barroso. "While coalition governments can be successful in implementing economic reforms, Spain has no experience with such arrangements at the national level."
In Vicar this month, hundreds of socialist supporters packed into the sports hall to cheer Diaz and her party's national chief, Pedro Sanchez.
The crowd cheered when the pair pledged to boost welfare spending and scrap labour laws passed by Rajoy that economists say have made Spain more competitive and attracted foreign investment but also pushed salaries down and unemployment up.
But Ayala of Podemos say both the Socialists and the PP miss the point as voters not only want a government or policy change but also to uproot the system.
She said 60,000 people had already contributed to financing the party's regional campaign with micro credits ranging from 100 to 10,000 euros.
Podemos, which has yet to open offices in Almeria and does not routinely pay for its candidates' petrol, has set a 400,000 euros spending cap for its regional campaign, about 10 times less than the amount the main parties will spend. The trend is similar at more market-friendly newcomer Ciudadanos.
"Andalusia always set the tone for what happens nationally. So the vote here will be key in assessing what comes next in Spain," said Ayala.
(Editing by Alessandra Galloni and Angus MacSwan)
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