Pressure on Spanish PM to explain Swiss bank money

[January 23, 2013]  MADRID (AP) -- Pressure piled up Tuesday on Spanish conservative Prime Minister Mariano Rajoy, with opposition parties demanding he appear before Parliament to explain how a former governing party treasurer amassed euro22 million ($29 million) in a Swiss bank account.

It is the latest in a line of alleged corruption scandals to rock the recession-hit country. Although no arrests have been made or charges filed, the scandal is hitting Rajoy, who is demanding great sacrifices of Spaniards as the country battles to emerge from recession with 25 percent unemployment.

The governing Popular Party's absolute majority allowed it to vote down a proposal by the Socialist opposition party and other groups for Rajoy to make a special appearance to discuss the case. But it was agreed that Rajoy should answer queries on the issue in Parliament's weekly questioning session Jan. 30.

In the year since taking office, his government has ushered in major labor market and financial reforms, as well as cutting pension increases and civil servant wages and raising taxes. The attempt to convince European Union authorities and investors it is serious about reducing its swollen deficit and won't need a bailout has caused widespread pain among the public.

"It's very difficult to sell austerity when there is suspicion you are being robbed," said Jose Antonio Olmeda, Political Science professor at Spain's Open University. "It's a blow to his political management and weakens his authority, but he is obliged to do what Europe wants him to do."

Opinion polls show Spaniards have little faith in their political parties while some 300 politicians are reported to be implicated in corruption cases across the country.

"The political situation is terrible," said courier Jose Manuel Hoyos, 49. "Cases are coming out every day. Meanwhile, we pay for the party with tax hikes and cutbacks."

Rajoy's Popular Party has been equally shaken by widespread newspaper reports that the same former party treasurer, Luis Barcenas, also allegedly distributed under-the-table bonuses to party leaders in payments from construction firms.

Spain's economic crisis stems greatly from the collapse of its once booming real estate sector in 2008.

The Popular Party has denied all wrongdoing and promised Monday it will commission an external audit of its finances to fend off the corruption allegations. Spokeswoman Maria Delores de Cospedal said an internal investigation would be conducted and that anyone found to have received inappropriate payments would be expelled from the party.

The Barcenas case follows other scandals involving bankers, politicians, town councilors and even the royal family.

Chief among them has been the perceived mismanagement of one of the country's top financial entities, Bankia by former Popular Party minister and ex IMF chief Rodrigo Rato. Bankia last February reported euro309 million in profits for 2011 but three months later changed that to euro3 billion in losses.

It has since been nationalized and been given a bailout of euro18 billion.

The royal family, meanwhile, has been busy battling to limit the damage caused by the naming of the king's son-in-law as a suspect in a case in which he and his partner allegedly funneled about euro5 million in public money their nonprofit foundation received for conferences between 2004 and 2006 to other companies they controlled.

A recent poll by the government-run Center for Sociological Research showed seven out of every 10 Spaniards felt the country's political situation was bad while political parties were ranked as the country's third biggest problem after unemployment and the economic crisis.

"People are angry and this can be seen in the polls. But so far it hasn't spilled onto the streets. There is still a sense of skepticism that no matter how much you protest you're not going to achieve that much," said Olmeda.

Barcenas, who served for one year as the party's treasurer and 19 as its assistant treasurer, resigned in 2009 after he was first named in a National Court probe into alleged irregular financing practices by the party.

His lawyer, Alfonso Trallero, has denied the Swiss account money was illegally obtained or linked to the Popular Party.

Traillero raised a separate storm when he claimed that Barcenas took advantage of a recent government amnesty for undeclared assets -- something which has already infuriated many Spaniards -- to "regularize" roughly half of the Swiss account money. Finance Minister Cristobal Montoro has agreed to address Parliament on the issue Wednesday.

"I think some austerity is needed, but obviously political parties, which operate on public money, should be subject to tougher control by the state. Things like this should not be allowed to happen," said retiree Alberto Ruiz del Portal, 64.

[Associated Press; By CIARAN GILES]

Jorge Sainz in Madrid and Barry Hatton in Lisbon, Portugal contributed to this report.

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