Madrid, Dec 21 (IANS): Spanish Prime Minister Mariano Rajoy will form a new government as his People's Party (PP) emerged the biggest political force in the general election, though it lost absolute majority in Congress.

The PP on Sunday lost 3.7 million votes and 63 seats in Congress compared with the 2011 elections. Its 123 seats falls well short of the 176 needed for a majority, Xinhua reported.

However, the party was well ahead of the 90 seats won by the Socialists, the 69 won by left-wing Podemos and the 40 claimed by the centre-right Citizens.

"This is still the first political force in Spain," said Rajoy from the balcony of his party headquarters in Madrid.

"We have won the elections again... Who wins the election should try and form a government," he said.

Rajoy's remarks were echoed by Socialist leader Pedro Sanchez, whose party had their worst ever election results.

Podemos leader Pablo Iglesias celebrated his party's eruption on the political scene.

"Spain has inaugurated a new political era in our country. We have won over 20 percent of the vote and over 5,000,000 voters. We are the main party in Catalonia and the Basque country and second in places such as Madrid, Valencia, Galicia and Navarra," Iglesias said.

Albert Rivera's Citizens will be disappointed with their 40 seats, but Rivera highlighted his party was made up of "normal people doing extraordinary things".

He promised Citizens' representatives would work for social justice, and also a new electoral law for the 21st century in Spain.