Political Atom Bomb Explodes in Spain; Prime Minister Refuses to Step Down After Being Implicated in Slush Fund Scandal; Eventually ...

Prime Minister Mariano Rajoy in in the battle of his life following additional revelations by Spain's former treasurer that Rajoy personally received undeclared cash payments.

Let's start this start this story with a flashback snip from my February 4 report Ledger Book Shows Rajoy Received 35 Payments Totaling €322,231; Rajoy's Incredulous Denial; Anger Rises.

"This is all false. I'm not in politics for money. I have never received undeclared money" said Rajoy.

Adding fat to the denial fire, accounting books allegedly written and kept by Luis Bárcenas, the former PP treasurer, implicate Rajoy personally, to the tune of €322,231.

Bárcenas' curious "atom bomb" defense was that the books were phony. Yet Bárcenas' promised to set off a political "atom bomb" if convicted.

My comment in February was: "If everyone is innocent, then it is logically impossible to set off a political bomb of any size, let alone an atom bomb. Simply put, the denials do not add up."

Opposition Calls for Resignation of Rajoy

Yesterday, the opposition called for “immediate resignation” of Mr Rajoy

Alfredo Pérez Rubalcaba, the leader of the opposition Socialists, called for the “immediate resignation” of Mr Rajoy, and warned that his refusal to stand down was causing “incalculable damage to a country that is living through difficult moments”. His call was echoed by other opposition leaders. The Socialists also declared that they would no longer co-operate with the Rajoy government, only weeks after the two sides issued a joint declaration setting out Spain’s interests ahead of the June European summit.

The Socialists also declared that they would no longer co-operate with the Rajoy government, only weeks after the two sides issued a joint declaration setting out Spain’s interests ahead of the June European summit.

The latest attacks on the government follow the publication of several mobile phone text messages that were sent between Mr Rajoy and Luis Bárcenas, the former PP party treasurer who allegedly operated a slush fund that made under-the-table payments to top party leaders, including to Mr Rajoy himself.

Mr Bárcenas was arrested at the end of June, after a judge ruled that the former treasurer should await his trial in prison. He is the subject of an investigation into how he managed to amass as much as €48m in accounts in Switzerland and elsewhere. Bail was set at €28m.

Rajoy Dismisses Calls to Step Down

Today the Financial Times reports Rajoy dismisses calls to step down as PP loses support.

Mariano Rajoy was battling on Monday to contain the political fallout from the slush fund scandal that has rocked his party, dismissing calls for him to step down and warning of the risks of plunging Spain and its long-suffering economy into “political instability”.

“I will defend political stability and I will complete the mandate given to me by the Spanish people,” the Spanish prime minister said.

Polls show the scandal has already inflicted severe damage on the standing of both the PP and Mr Rajoy personally, with fewer than a quarter of voters saying they would vote for the ruling party if elections were held now.

Mr Rajoy was speaking just hours after the man at the centre of the scandal launched a fresh legal broadside against the prime minister and other senior PP officials. Luis Bárcenas, the former party treasurer, told a criminal court in Madrid that he indeed managed a slush fund that was fed by secret donations from construction companies and other businesses.

According to several accounts of the closed-door hearing, he also confirmed allegations that the fund was used to make quarterly cash payments to top party functionaries, including to Mr Rajoy himself. In a new revelation, Mr Bárcenas said he made additional cash payments worth €20,000-€25,000 to Mr Rajoy and to Dolores de Cospedal, the party leader, between 2008 and 2011.

“He was really very credible. He gave a lot of details,” one lawyer present at the hearing said.

Political Atom Bomb Explodes

And so here we are. Bárcenas exploded his "atom bomb" with additional, credible details as promised.

Rajoy wants to stay in power and proclaims a political mandate. What kind of mandate does one have with support running less than 25%?

What kind of mandate does Rajoy have when he has taken huge political bribes without bothering to pay taxes on them?

Eventually ...

Eventually, a populist will stand up with a dual message "to hell with the euro and to jail with all the liars and thieves".

That person will be elected.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com