For one thing, cracks may be opening within the Basque Nationalist Party.

ECONOMIST: Spain

In Spain the minority Socialist Government has had to moderate its plans so as to get the blessing of the Basque Nationalist Party.

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It is hoping to oust the moderate Basque Nationalist Party (PNV) from the Basque parliament, and is even considering a pact with the Socialists to achieve this.

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Last month, ETA appeared to suffer a further setback when the Basque Nationalist Party (PNV), which advocates independence from Spain through peaceful means, won 33 seats in the 75-member parliament in Basque regional elections.

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The moderate, peace-minded Basque Nationalist Party, which runs the regional government and has five seats in parliament in Madrid (where it generally supports Mr Aznar's government in important votes), sat mum for a couple of days before lambasting the verdict.

ECONOMIST: Spain and the Basques

The arithmetic of Spain's parliament, where the Socialists are seven seats short of a majority, and the decision of fairweather allies in left-wing and Catalan nationalist parties to withhold support, leaves the prime minister at the mercy of the six deputies of the Basque Nationalist Party (PNV).

ECONOMIST: Spanish politics

Bush announced that the United States would place financial sanctions on Batasuna, a Basque nationalist political party that the Spanish government says is the political wing of ETA, a militant separatist group fighting for an independent homeland.

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