(Adds visit by politicians to site of killing) By Jason Webb and Inmaculada Sanz MADRID, March 7 (Reuters) - Spain's main political parties cancelled closing campaign rallies on Friday, two days before an election, after a former councillor from the governing Socialist Party was shot dead in the Basque Country. The government blamed ETA separatists for the killing of Isaias Carrasco, who was shot five times in front of his wife and young daughter outside his house in the town of Mondragon. Whether Carrasco's murder would have any effect on the outcome of Sunday's election, in which the Socialists are favourites, was unclear. In 2004, Socialist Party leader Jose Luis Rodriguez Zapatero became prime minister with a surprise election victory three days after an attack by Islamist militants who killed 191 people by bombing Madrid trains. The Socialist Party and the opposition Popular Party cancelled rallies scheduled for Friday, the last day campaigning was allowed, and both Zapatero and PP leader Mariano Rajoy travelled to Mondragon to pay their respects to the dead man's family. Zapatero spent an hour with the family and local party members before emerging to talk to reporters. "The conviction of democrats is much stronger than our pain and all democrats together will achieve the end of violence," he said. "There will be justice, they will be caught, they will pay and they will go to jail. That is their only destiny." Rajoy also condemned the killing and ETA. ETA "can abandon all hope of achieving its political objectives because no one will negotiate with them and it has no chance of winning its battle against 45 million decent and honourable people". The prime minister had been told of the killing while waving to followers at a campaign rally in the Andalusian city of Malaga. Television images showed him turn stony-faced after a senior official spoke in his ear. Zapatero broke off peace talks with ETA in December 2006 after they killed two people with a car bomb. His Socialist party leads the conservative Popular Party in opinion polls. He has led a crackdown on ETA, but the Popular Party has accused him of being soft on the Basque separatists in the past. "This is a day of mourning. We should all stand by the family of Isaias Carrasco and remain united, united against ETA," said Popular Party candidate Mariano Rajoy. HIGHER TURNOUT? Julian Santamaria, a politics professor at Madrid's Complutense University, did not think the killing would alter voting intentions. "It might mean more people get out and vote on Sunday," he told Reuters. Leftist voters are historically more prone to abstention than conservatives, and Zapatero's surprise victory in 2004 was due partly to an unusually high turnout by young voters angered by the then PP government's blaming the train bombings on ETA. ETA has killed more than 800 people in four decades in its fight for independence of the Basque Country in northern Spain and southern France, even though polls show most Basques do not want this. A neighbour described how he was awoken by the shots. "I could see him (Carrasco) lying on the ground and his wife and daughter were just shouting: What's going on? They shot my father three times," Enrique Balmedo, 26, told Reuters by telephone. Until now, the issue of Basque separatism had played a relatively minor part in the elections, which have been dominated by debate over the slowing economy and immigration. The Popular Party, founded by supporters of former dictator Francisco Franco, was 4 percentage points behind the Socialists on Monday before a pre-electoral ban on publishing opinion polls came into force. Zapatero hopes his socially liberal policies, such as legalising gay marriage and making divorce easier, will bring young voters to the polls despite signs that a decade-long boom fuelled by rising house prices and easy credit may be ending. House prices have fallen by 3.5 percent in nominal terms from their peak in July, after tripling in 10 years. Unemployment has risen by 240,000 in a year to 2.3 million. The Socialists hope higher infrastructure spending and a 400-euro tax rebate will help keep the economy growing at 3 percent a year and create jobs for idle construction workers. The Popular Party wants cuts in taxes on salaries and companies and tighter immigration controls to reduce the strain on public services. (Additional reporting by Ben Harding, Teresa Larraz, Sonya Dowsett, Jane Barrett, Elisabeth O'Leary, Raquel Castillo, Emma Pinedo, Joe Ortiz and Arantza Goyoaga in Bilbao; editing by Andrew Roche)
