Spanish leader teeters under corruption scandal

MADRID, Spain — Ticking up by a few thousand each day, the online petition's signatures have surpassed 1 million.

Its demands are simple: Senior members of Spain’s governing Popular Party (PP) should resign over recent corruption allegations.

“We are sick of watching the decline and fall of a democracy that has been stolen from ordinary people while the political and business elites carve up our country with impunity,” reads the campaign's text.

Like the petition, the scandal has moved at breakneck speed, wrong-footing the conservative government of Prime Minister Mariano Rajoy and unleashing a political crisis that threatens to destabilize an economy perched on a precipice.

The full extent of the affair came to light on Jan. 31, when the newspaper El Pais published the contents of what it said were notebooks belonging to a former PP treasurer, Luis Barcenas, including details of an apparent party slush fund. The fund was allegedly used from 1990 until 2008 to unlawfully pay out cash to senior PP figures, including Rajoy, his deputy Maria Dolores de Cospedal and other party bigwigs.

Even Jose Maria Aznar, the close George W. Bush ally who was Spain's prime minister from 1996 to 2004, could be implicated, the paper said.

The notebooks also appear to show the fund was allegedly financed by massive, illegal donations from the private sector.

“We’re looking at what could be the most serious corruption case in the history of Spain’s democratic era,” said Soraya Rodriguez, lawmaker of the opposition Socialist Party, which has called on Rajoy to resign.

A conservative who took office in December 2011, Rajoy roundly denied the accusations in a statement to the press on Feb. 2.

When asked about the case in Berlin, where he was meeting German Chancellor Angela Merkel two days later, however, Rajoy came across as slightly more equivocal.

“None of this is true, except some things which have been published in the media,” he said.

What the government has not denied is the revelation that Barcenas had held a Swiss bank account containing up to $29.5 million.

Compounding the bad headlines, the ex-treasurer’s lawyer says his client took advantage of an amnesty for tax dodgers introduced by the PP last year.

“This is a deep political crisis,” said sociologist Josep Lobera, who believes Spain’s ongoing economic woes have made Spaniards more sensitive to these issues. “Right now people are looking much closer at what politicians do than five years ago. A corruption scandal has 10 times more effect now than it did then.”

This may be Spain’s biggest recent corruption scandal, but it’s by no means the first.

Barcenas’ Swiss bank account came to light as part of an ongoing investigation into an alleged network of kickbacks involving PP politicians across Spain. Rajoy’s health minister, Ana Mato, is facing calls for her resignation since the probe raised allegations she had accepted gifts from the network.

Meanwhile, Oriol Pujol, a senior politician in the northeastern region of Catalonia, is facing accusations of influence trafficking.

And even the royal family has been tainted. The king’s son-in-law, Inaki Urdangarin, is accused of embezzling a charity he used to head and, along with his former business partner, is facing a property embargo after failing to post an 8-million-euro ($10.7 million) bail.

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In total, about 300 Spanish politicians are currently being investigated. Analysts blame the glut of corruption in large part on a decade-long real estate boom, which pumped huge amounts of money into the economy before collapsing in 2008. They also point to the country’s political structure, which gives regions considerable autonomy from central government controls. In addition, Spain’s system of checks and balances is seen as weak, such as its highly politicized judiciary.

“There’s a feeling that suddenly Spaniards are waking up to something, that many of the things they believed in — the royal family, banks, politicians — are not trustworthy any more,” said Lobera.

But while the corruption scandal is further undermining the image of Spain’s institutions, there are concerns that an already beleaguered economy could also suffer.

With a double-dip recession and one of Europe’s highest jobless rates at 26 percent, for months Spain has been seen as the most likely candidate to follow Greece, Ireland and Portugal in requesting an EU sovereign bailout. But the government rode out the market storm in 2012 and was confident it could convince investors and the international community that stability was slowly returning.

Until this scandal, that is.

“This is a very big distraction for the government and if it isn’t resolved in a short period, then the markets are going to give us a rough ride again,” said Jose Manuel Amor, an analyst at Analistas Financieros Internacionales consultancy.

The spread on Spanish debt compared to that of Germany, seen as a key indicator of market confidence, spiked this week as investors were apparently left unconvinced by Rajoy’s denials of wrongdoing.

The anti-corruption attorney’s office is now investigating the case, having taken statements from Barcenas and others this week. But in the meantime, anger is growing among ordinary Spaniards, as shown by the online petition and the daily protests outside the PP headquarters in Madrid.

“In any other country, they would have resigned under these circumstances,” says Ignacio Guardo, a businessman who in the past has voted for the PP. As he speaks, he looks around his interior decoration store in Madrid, which he is about to close due to the economic crisis.

“Spain’s economic situation is bad enough as it is; all this uncertainty just makes things worse.”