A poster showing Spain's Socialist Party (PSOE) leader Pedro Sanchez is seen in Lugones, Spain, September 28, 2016. REUTERS/Eloy Alonso/File Photo(reuters_tickers)
By Angus Berwick and Blanca Rodríguez
MADRID (Reuters) - Spain's political deadlock has taken its most dramatic turn in nine months as the main opposition Socialist party's leadership has torn itself in two, with members resigning en masse to try to unseat their leader and avoid a third unwinnable election.
A stand-off between the Socialists, headed by Pedro Sanchez, and the conservative People's Party (PP) - which won the most votes but fell short of a majority in two inconclusive elections - has frustrated repeated attempts to form a government.
With the clock counting down to a possible third national election in December, the Socialist rebels hope they can oust Sanchez and seek ways to break the deadlock, including a potential abstention in a confidence vote to let acting Prime Minister Mariano Rajoy stay in power.
On Wednesday, the 17 rebels resigned from the Socialist's 38-strong executive committee, which was already down three members, and called for Sanchez, who oversaw the party's worst election result in June, to stand down.
In a confidence vote in August, Sanchez refused to allow a minority government led by Rajoy, whose party he chastises as corrupt and committed to austerity.
The rebels have said the committee, the party's top administrative level, now must be dissolved and a form of caretaker administration ushered in. A party conference would then have to pick a new leader in a few weeks.
"The leadership of this party is gone, half of them plus one have resigned," Veronica Perez, one of the rebels, told reporters on Thursday outside the Socialists' Madrid base.
"They can shield themselves and entrench themselves, but it is a question of dignity," Perez, the party's representative in Seville, said of Sanchez and his remaining supporters.
The rebels, led according to insiders by the party's powerful Andalucian chief Susana Diaz, say they want to force Sanchez out before a party assembly meeting on Saturday at which he has said he wants to open up a leadership race he would likely win with support from the grassroots.
Sanchez has faced heavy criticism from some of the Socialist party's most influential figures and the press. El Pais newspaper, which traditionally has supported the Socialists, called him an "unscrupulous fool" in an editorial on Thursday and demanded he resign to save the party.
Parties' failure to form a government has left Spain deep in uncharted legal territory. The Socialists' two warring factions have interpreted the party's legal framework on whether Sanchez's leadership remains legitimate in their own ways and it is not clear which will prevail.
The Socialists' number two, Cesar Luena, told a news conference on Wednesday night that Sanchez, who has stayed out of the public eye since the coup was launched, would remain head of the party until a congress was called to name a new committee.
Parties have until Oct. 31 to form a government or a new election will be called, prolonging the uncertainty that has a cast a shadow over Spain's economic recovery and left the country increasingly adrift from its international partners. The Bank of Spain, however, hiked its growth forecast for 2016 on Thursday.
The turmoil at the centre of Spain's national government has also caused support for independence in Catalonia to rally. The regional head, Carles Puigdemont, said on Wednesday his government would hold a referendum with or without Spanish consent next September. He faces a confidence vote on Thursday which he called to test his government's support.
(Editing by Julien Toyer and Alison Williams)