The combative socialist leader, Joe Bossano, was ousted as Chief Minister after eight years of pursuing a "go-it-alone" policy that antagonised both London and Madrid. The GSD won 53 per cent of the vote, eight seats in the house of assembly, and the outgoing Gibraltar Socialist Labour Party took the remaining seven with 41.6 per cent.
Mr Caruana, 39, said yesterday that decolonisation of the Rock - the chief plank in Mr Bossano's platform - would take second place to the aim of refurbishing Gibraltar's tattered international image and promoting a stable climate for investment and economic development.
"We've made clear that our emphasis is on creating an environment of political and economic stability in which the private sector can prosper, to create economic stability and jobs. We will not pursue the question of decolonisation in a manner or at a pace that puts that priority in jeopardy," he said yesterday.
Mr Bossano, however, remained defiant, describing the result as "very bad news for Gibraltar". He said: "The whole process of decolonisation will be set back but not prevented. Although they may be celebrating in Madrid and in the Foreign Office in London, my message to both is that this is going to be short-term."
Mr Caruana pledged to restore international confidence in Gibraltar that has been shaken by allegations of shady dealing. "The Spanish campaign to suggest that Gibraltar is a centre for drug money laundering is simply not true," he insisted.
He plans to make overtures to Spain, ending his predecessor's veto on dialogue, while conceding nothing on sovereignty. "We see the value of engaging Spain in dialogue with a view to improving co-operation and reducing historical tensions and hostility, but we're not willing to pay for that with negotiations on sovereignty. Sovereignty is not for sale for better relations with Spain," he said.
Gibraltar's change of direction will be welcomed by Britain which has barely concealed its exasperation with Mr Bossano. And Madrid, whose recently elected conservative government is in ideological sympathy with Mr Caruana's pragmatic, pro-business party, will be hopeful that some points of friction with London may be smoothed.
The contrast in style between the urbane and patrician Mr Caruana, a barrister educated in a English public school, and the working class Mr Bossano, who rose to power on the strength of his skills as a tenacious trade union negotiator, could not be more marked.
A Caruana charm offensive is likely to have an emollient effect internationally. But his insistence that sovereignty remains unnegotiable may limit real progress with Madrid, who cannot be expected to be sympathetic to his demand that Gibraltar have a negotiating voice of its own. Madrid and London talk only to each other about Gibraltar, a situation Mr Caruana said yesterday was unacceptable. "There has to be a proper voice for the people of Gibraltar to speak for themselves," he said.
Mr Caruana pledged to stamp out drug and tobacco smuggling based in Gibraltar, but Madrid will be judging actions rather than words. Spain's new Foreign Minister, Abel Matutes, has raised the prospect of closing the border if effective measures are not taken.
Mr Caruana's ministers will be drawn from the Rock's leading traders and entrepreneurs. Mr Bossano's support is among the workers, who gave him a landslide in 1992 but became disenchanted as jobs dwindled and his policy of disengagement with Britain did not bear fruit.
Mr Bossano, still regarded with affection and respect, promised to continue to lead his party in opposition and give the new government "a hard time". But he would not be "unnecessarily obstructive" and would back Mr Caruana in any conflict with Britain.
The GSD party was founded in 1990 by Mr Caruana's dynamic deputy, Peter Montegriffo, 36, then an opposition MP. Mr Montegriffo abandoned politics a year later, retaining his partnership in a law firm that represented Mr Bossano's government, and Mr Caruana took over.
Mr Montegriffo returned to the fray last summer and yesterday topped the poll as the Rock's most popular politician, prompting speculation of possible future leadership challenge. But for the moment, victory is a unifying force.
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