In a stunning blow to the Socialists who have ruled Spain for nine years, the conservative Popular Party (PP) scored a resounding victory in Sunday’s national elections, amidst a backdrop of severe economic hardship in the country.

The PP, which gained 186 seats in the 350-seat lower house of Madrid’s parliament, will have its leader, Mariano Rajoy, as the new prime minister.

The PP won 44.6 percent of the popular vote, versus only 28.7 percent for the Socialists – their worst showing since the return of democracy to Spain in 1975. The Socialists now hold 110 seats in the lower house of parliament.

Voter turnout was 71 percent.

However, markets in Europe haven't hailed Rajoy’s triumph. The bourses in Germany, France, UK and Spain are all down by at least two percent in mid-Monday trading. More importantly, the yield on Spanish government bonds  (i.e., borrowing costs), remain alarmingly high. The yield was as high as 6.5 percent on Monday, just below the seven percent “danger level.” (Last week, the rate reached as high as 6.975 percent).

The Spanish economy is also burdened by tepid economic growth and unemployment in excess of 20 percent. For Spaniards under the age of 25, joblessness stands at 46 percent.

In a victory speech outside party headquarters in central Madrid, Rajoy warned that the financial crisis won't be solved overnight.

There won't be any miracles,” he said. “We never promised any.

But he added reassuringly: We will stop being part of the problem and will be part of the solution. We can only go forward if we all go forward together. Forty-six million Spaniards are going to wage a battle against the crisis.

Miguel Arias, the PP's campaign coordinator, told BBC that Spain needs to make all the sacrifices.

We have been living as a very rich country, he said.

The losing Socialist candidate, former interior minister Alfredo Perez Rubalcaba, admitted the Socialist Party did not have a good result. We clearly lost the elections.” Meanwhile, former Defense Secretary, Carme Chacon, described the tally as a severe defeat.”

However, there's much concern over what exactly Rajoy can do to alleviate the crisis. During the campaign, he refused to clearly spell out his program, leading to charges from the Socialists that he secretly seeks to order huge spending cuts and massive privatization of state-owned assets.

All Rajoy has said is that he'll cut spending across the board--except with respect to pensions--but he hasn’t provided details to satisfy either the public or the markets.

Prior to the election result, Professor Pablo Fernandez, of the IESE Business School in Madrid, told The Independent newspaper of Britain: There is total uncertainty about the cuts. We know there'll be cuts but we don't know where or how deep. If Mr. Rajoy announced who his Minister of Finance and economic team will be, that would be one less doubt for the markets, too.

Fernandez added: This insecurity about the measures [Rajoy] will take will continue to trouble investors, certainly until he names his economic team ... and we mustn't forget that some people are interested in the instability continuing, when the values rise and fall like this [is] where they make their money.

Some analyst, nonetheless, hailed the election result.

The fact the PP has won by a large majority is a very good sign for the markets,” Teresa Sadaba, professor of economics at Spain’s IESE Business School, told the Daily Telegraph newspaper.

“It means stability. The best scenario now would be for Spain to announce some new emergency austerity measures but I am not sure whether this will happen or not.”

According to Spanish media reports, Rajoy likely won't be sworn in as prime minister by King Juan Carlos until Dec. 22.

During his victory speech, Rajoy said: “We are facing a decisive moment for Spain. We are at a crossroads that will shape the future of this great country not just in the next few years but the next few decades.”