Spain's ruling Socialist party has suffered an overwhelming defeat in the local elections on Sunday.

The centre-right Popular Party (PP) had almost a 10 percent point lead, with the 91 percent of municipal votes, the interior ministry said. The voters have punished the ruling party after a week of protests for the highest unemployment level and the country’s stagnant economy.

Spain’s Prime Minister Jose Luis Rodriguez Zapatero accepted his defeat but has ruled out early general elections.

The voting took place amid mass protests against high unemployment.

He pledged to continue job-creating reforms until his mandate, a general election which will be held in March next year, Zapatero said.

Zapatero acknowledged that the three-year-long economic crisis had destroyed thousands of jobs in the EU member-nation. “It is a crisis that had profound effects on citizens' morale. I know that many Spaniards suffer great hardship and fear for their futures, he said. Today, without doubt, they expressed their discontent.

The Socialists party has lost its reputation in Barcelona and Seville and the Castilla-La Mancha region where the socialist have ruled for 28 years.

The general elections were ahead of a week of non-violent protests. Thousands of unemployed people who account for 21 percent of the country population rallied demonstrations.

Spain's economy has still not emerged from recession and growth has not been aggravated even though the appropriate measures have been taken by the government.

The victory of PP will increase pressure on the prime minister to step down before his term is up in March 2012. Analysts said that most of this pressure will come from within the Socialist party itself.

The panorama does not transmit tranquility to foreign investors, the difficulty to take economic decisions is accentuated, said Emilio Ontiveros, president of International Financial Analysts consulting firm, reported by Reuters.