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Spain PM resists resignation demands amid scandal

Tuesday - 7/16/2013, 7:56am  ET

Spain's Prime Minister Mariano Rajoy, right shakes hands with his Polish counterpart Donald Tusk at the Moncloa Palace in Madrid, Spain, Monday July 15, 2013. Conservative Spanish Prime Minister Mariano Rajoy is certain to face a barrage of questions in a press conference following newspaper publication of alleged text message exchanges between him and a now jailed former party treasurer that have prompted opposition demands for the premier to resign. El Mundo published Sunday what it said were friendly text messages between Rajoy and former Popular Party treasurer Luis Barcenas. Barcenas is at the heart of a probe into a slush-fund scheme that allegedly included payments to top party figures including Rajoy. He is to be quizzed by a judge in the case again Monday. Spaniards are currently coping with harsh austerity measures and tough economic reforms designed to reduce the country's debt. (AP Photo/Paul White)

CIARAN GILES
Associated Press

MADRID (AP) -- Spain's prime minister on Monday brushed off demands he should resign after text messages emerged showing him comforting a political party treasurer under investigation over a slush fund and secret Swiss bank accounts. The spectacle of alleged greed and corruption has enraged Spaniards hurting from austerity and sky high unemployment with no end in sight.

As Mariano Rajoy told reporters he would not step down, former Popular Party treasurer Luis Barcenas testified behind closed doors in Madrid, telling a judge investigating the slush fund allegations that he gave tens of thousands of euros in secret cash payments to Rajoy and party secretary general Maria Delores de Cospedal between 2008 and 2010 while they were key opposition leaders.

Rajoy declined to comment on specifics, while Cospedal slammed Barcenas' declarations as "new slander and lies" from a criminal suspect and said she never received cash payments from him. Rajoy insisted after meeting with Poland's premier that he will "see out the mandate the Spanish electorate gave me. This is a stable government that is going to fulfill its obligations."

Rajoy, who says neither he nor other party figures received illegal payments, did not deny exchanging text messages with now jailed former Popular Party treasurer Luis Barcenas. He insisted that the messages demonstrated that the state "was not bowing to blackmail. This is a serious democracy."

But the text messages from 2011-2013, some analysts said, appeared to convey a tone of cronyism among two men who talked to each other like buddies.

"Luis, nothing is easy," one message from Rajoy to Barcenas said. "But we are doing what we can. Cheer up."

Analysts are divided over whether the scandal could prompt an early exit for Rajoy, whose conservative party ousted the ruling Socialists in a 2011 landslide giving his party an absolute majority in Parliament and no requirement to call new elections until late 2015.

If Rajoy's position as leader becomes untenable, his party could theoretically decide he needs to go and select someone else as prime minister. It's unlikely that there would be any changes in Spain's tough austerity measures aimed at helping keep the European debt crisis at bay.

But the ever deepening scandal and its twists and turns have shaken Spaniards who saw their country teeter on the edge of a full-blown public finances bailout last year before Rajoy asked for a 100 billion euro ($130 billion) bailout of the country's hurting banks, raised taxes and cut public services -- all in the name of saving the country from ruin.

And the corruption allegations come on top of unemployment at 27 percent with the rate double that for those under age 25, plus an ill-fated elephant hunting trip by Spain's king last year seen as a shameless sign of royal excess while the economy tanked.

Sitting on a shady park bench on a hot day in downtown Madrid, guide dog trainer Juan Antonio Luna said the corruption allegations on top of the painful cuts Spaniards have had to endure keep on amazing and angering him as details leak out bit by bit .

"They raised our taxes, they cut services like national health care, and they got rid of scholarships for college students," said Luna, 56. "But there are millions (of euros) hidden away in Switzerland. If this happened in the United States, they would fire the president. Not here. They have no shame. They are raising taxes through the roof and swindling us at the same time."

Investors are closely watching the case play out without panicking yet, but Spain's already shaky image abroad is getting hammered, said Javier del Rey, a political science professor at Madrid's Complutense University.

"We're hitting new lows, with the Spanish brand tarnished across Europe," he said. "The question is if Rajoy stays, will it go down more? How is he going to be received in Brussels, London and Paris under these circumstances?"

Rajoy's leadership of his party is strong and party members fear that forcing him to step down could be make matters worse, potentially causing the party itself to implode, said Florentino Portero, a professor of contemporary history at Spain's Open University.

"But Barcenas places a question mark over whether Rajoy has the legitimacy to lead the government, particularly at a moment when strong leadership is needed to carry out the reforms Spain needs," Portero said. "At a time when the government is raising taxes to unprecedented limits, threatening the livelihood of the middle classes, that the same party should be found to be hiding its own income from the tax inspectors is morally unacceptable."

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