MADRID (Reuters) - Spanish Prime Minister Mariano Rajoy secured the backing of his conservative People's Party (PP) on Saturday to stay on as its leader as his minority government attempts to forge pacts with the opposition to pass a budget and stay in power.

Rajoy, 61, was re-elected by party representatives at an internal conference - the fourth time since 2004 he has run unchallenged for the PP's leadership.

His re-appointment marks something of political comeback after the PP, battered by corruption scandals and unpopular austerity policies, was stripped of its absolute majority in two inconclusive national elections.

Rival parties had called for Rajoy to step aside during the prolonged talks to form a government last year. But he eventually prevailed and secured a second term in office last October, showing his staying power in spite the rise of newer parties such as anti-austerity Podemos ("We Can").


"We offer common sense and moderation. We don't want a revolution or any shocks," Rajoy told PP supporters on Saturday, in one of several thinly veiled digs at Podemos as he also took aim at populist movements across Europe.

With talk of a succession within the PP quashed for now, Rajoy still faces major challenges in the coming months, including trying to pass a budget for 2017 through parliament with the weakest mandate in modern Spanish history.

He will need to gain support from opposition forces, and there remains a chance that Spain could be plunged into back into political uncertainty if he fails. He has warned another election could be only the way out if the budget is not passed.

This option could hamstring the PP's rivals - Podemos is locked in an internal spat over strategy while the center-left Socialist party is currently without a leader - and most political analysts believe the budget will eventually be approved.

But Rajoy will also have his hands tied in parliament when it comes to passing new policies, and some parties are now looking to unite to try to overturn some of his previous reforms, including an overhaul of the labor market.

Rajoy has kept challenges from within the PP at bay in spite of losing two elections, in 2004 and 2008, as the party's candidate. He then led the PP to its biggest electoral victory in 2011, against the backdrop of a worsening recession.

The party lost its absolute majority in December 2015, and again in a repeat election in June 2016.

(Reporting by Sarah White and Inmaculada Sanz; Editing by Alison Williams)

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