The Spanish cabinet is to
discuss the next steps in the process of King Juan Carlos's abdication
and the accession of his son, Crown Prince Felipe.
Ministers will discuss the steps needed to approve Crown Prince Felipe's accession to the throne.
Juan Carlos was seen as popular for much of his reign, but recently many Spaniards have lost confidence in him.
The Spanish constitution does not have a precise law regulating abdication and royal succession.
Mr Rajoy's emergency cabinet meeting will draft an abdication law which must then be approved by parliament. Correspondents say that the process could take as long as a month.
The two main parties in parliament remain loyal to the monarchy.
But most left-wing parties are opposed and staged demonstrations attended by tens of thousands of people across many cities including Madrid and Barcelona.
"Send the Bourbons to the sharks!" protesters chanted in Madrid. The Spanish royal family is a branch of the House of Bourbon.
Many demonstrators are demanding a referendum on the future of the monarchy.
Spanish media say Prince Felipe will be proclaimed King Felipe VI by parliament on 6 June and a coronation ceremony will be held soon afterwards.
It is not clear when exactly that will be - King Juan Carlos was crowned five days after parliament proclaimed his as king.
The new king will inherit an institution that has been tarnished by scandals in recent years.
Support for the monarchy fell further when it was discovered that Juan Carlos had been on a lavish elephant hunting trip to Botswana in April 2012, in the middle of Spain's financial crisis.
Stabilising force
Juan Carlos took the throne in 1975, after the death of General Francisco Franco, the dictator who had ruled for 36 years.
The king became Spain's first crowned head of state for 44 years.
But he soon ignored Franco's supporters, who wanted an extension to autocratic rule, and ushered in a new system of parliamentary monarchy.
In later years he became more of a figurehead.
He has been credited as a stabilising force for independence-minded areas such as Catalonia and the Basque region.
Prince Felipe and his wife - former television presenter Princess Letizia - have recently taken on more important roles in ceremonial events.
Felipe appears to have been untarnished by the scandal.
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