By Inmaculada Sanz and Angus Berwick
MADRID (Reuters) - Spain's Socialists will not allow incoming conservative leader Mariano Rajoy a free hand to govern despite allowing him a second term, one of their leaders told parliament on Thursday during a heated debate before a first confidence vote.
Rajoy is expected to lose the first vote that starts at around 1800 GMT, but the Socialists, in a change of stance, have agreed to abstain in a second vote on Saturday, permitting him to form a minority government and end more than 300 days of political limbo.
Rajoy's People's Party won two national elections in December and June but without a majority, and efforts to form a coalition in a fragmented parliament failed.
Rajoy urged opponents on Wednesday to set aside their differences and to work together to avoid another election in the future which he said would be damaging for the country.
But Socialists and members of anti-austerity Podemos queued up inside and outside parliament to make clear they would fight Rajoy's conservative policies from his first term and keep parliament in flux.
"You will not dominate parliament, the majority you lack will triumph and a lot of the time it will align with the PSOE (the Socialists)," Antonio Hernando, a senior Socialist member, said.
To win the first confidence vote, Rajoy would need an absolute majority of 176 in the 350-seat parliament. A loss will trigger a second vote 48 hours later in which parties can abstain, meaning he only needs more votes in favor than against.
Rajoy will need support from outside his People's Party to pass legislation in what would be a challenging second term.
Top of the list of the tasks awaiting him is shrinking Spain's budget deficit to meet its 2017 target agreed with Brussels which requires at least 5 billion euros ($5.46 billion) of either cuts or revenues.
The Socialists remain deeply split over their planned abstention vote, which a majority of their senior members approved on Sunday. The party's wing in the Catalonia region has already said it will vote "no" on Saturday.
Rajoy urged the Socialists on Thursday not to reverse his economic reforms and offered an olive branch to the opposition saying he was willing to compromise and strike a national pact on reforming Spain's struggling education system.
"Having a government that cannot govern is just as bad as not having a government," Rajoy told lawmakers.
Podemos' head Pablo Iglesias, who has called for protesters to surround parliament for Saturday's vote, laid claim on Thursday to leading the opposition to Rajoy's incoming administration and denounced the Socialists as partners of the PP, which he brands as corrupt and committed to austerity.
"There are more potential criminals in this chamber than there are outside," Iglesias said to jeers from other politicians.
