An ongoing tradition: Corruption in Spanish Government

Mariano RajoyIn the midst of economic turmoil,  Spain is once again in the spotlight. This time with corruption allegations of high-ranking members of People’s Party and Prime Minister Mariano Rajoy taking  €25,000 from secret party funds.

The very first judicial investigation was launched in 2007 and five suspects were detained two year later. One of the suspect was Luis Barcenas the former treasurer of People’s Party who faced accusations of  tax evasion, fraud and money laundering. This investigation was called ‘Gürtel corruption scandal’ and the legal process kept going on.

Two days ago, another scandal erupted in the Spanish Government. Luis Barcenas was this time accused of handing out 10,000 euro cash in envelopes to high level People’s Party officials. National Court also reported that he accumulated up to 22 million Euros in a swiss bank account  between 2005 and 2009 . All this money thought to be linked with the previous Gürtel case. On the other hand, Barcenas denied the accusations and defended himself saying that he was holding the money for investors.

However, the more the story is dug into, the more shocking the level the scandal reached. Some handwritten records belong to Barcenas were found. People’s Party members were discovered to be illegally financed by Barcenas through an unofficial parallel accounting within the party. Between 1990 and 2008 some donations, payments, other additional expenses were  made to high level party members of PP by businessmen. There were critical members of Spanish government including Ministers, Secretary and Vice President. However, the most important name on the list was Mariano Rajoy, the former general staff of People’s Party who is the current Prime Minister of Spain.  The payments showed as of 1997 that Rajoy received about  25,000 euro in each year.

An answer came quickly from the ruling party. Mr. Rajoy  said that the documents are false. In a press conference, People’s Party General Secretary Maria Dolores too refused all the accusations saying her party is clean and transparent.  The ruling party will take legal action against whoever has leaked documents. Aside from all, there was one statement of the socialist leader Alfedo Perez Pubalcaba that seemed to show the true reality of Spain today: Rather than the solution for this country, Rajoy has become yet another problem.

In fact, the public rage rose more than ever. People now feel left alone by their government while they were facing the hard face of the crisis. Thousand who protested budget cuts now took to the streets in protest of plundering public funds and tax evasion.

It wasn’t long time ago Spain enjoyed privileges that came along with its membership to EU. Despite some spectators calling this the poor country joining the ‘rich’ club, Spain’s economy dramatically boomed by adopting the new currency. Thousands of Spanish municipal banks were built all over the country and they could loan money at cheap rates. Since borrowing was so easy and cheap, everyone showed a high demand. Buying a property became less difficult. As they were being sold, new properties were built by construction firms. Real estate sector rapidly boomed holding the core of the economy. From 1996 to 2007 the numbers showed that there was a 200% increase in residential real estate. Investment  was available too since the investors could see the rising of the price. A bubble was forming.

When the economic crisis broke out in USA,  Spain seemed to be the only strong economy that was not affected as adversely as Germany and France. But it was matter of time that there was going to major change in land of Spaniards.  That change came about through the greed of Spanish bankers and investors, who trampled on the country’s well-created banking regulations.  Heavily invested congressional representatives, board members, and regulators allowed the banks to over-invest, shrinking their capital reserves to levels below accepted limits through questionable accounting practices.  This was done (it now seems in collusion with government members) with the hope of quick and massive profits, without consideration for what would happen if the bubble burst, which of course it did.

After 5 years of recession with high sovereign debts, Spain is still trying to recover from the crisis. Due to closing businesses, skyrocketing unemployment rates, and budgets cuts, people are frustrated with the government. They are either out in the street protesting or migrating to other countries to start over. With the shocking corruption scandal, the Spanish government now appears set to receive more and heavier blows.  Disenchanted by deep recession, people feel betrayed by their government and are calling for a change, in which trust will play a central role.


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