Corruption in Spain: Something rotten in the state of democracy

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Operation Punica is the latest in a string of investigations led by prosecutors surrounding illicit payments to politicians. The allegations follow on from the Gurtel case, a scandal which has engulfed politicians from across the political spectrum.

Faith in the political system is at an all-time low, with a recent EU report showing that 95% of Spaniards now believe corruption is widespread, Alexandre Mato reports from Brussels. Before the 2008 financial crisis, Spaniards were most concerned by the issue of terrorism. Corrupt politicians have now usurped the terrorists as more worrying for the country.

But what are they doing about it? The answer, simply, is not much. The scale and frequency of new allegations are such that no sooner have people started to become outraged by one issue, another comes along to sweep it into the background. With a judicial process which is both politicised and cumbersome, many cases take years to come to court. That has fostered the impression amongst Spaniards that white collar crime is now carte blanche for the country’s elites.

Primarily, the evidence focuses on the misappropriation of contracts from public bodies to private interests, who returned the favour in the form of kick-backs to politicians. It begs the question: Given the state of Spain’s public finances, how does Brussels view the current state of affairs within the Spanish political system?

Publicly, EU politicians have been silent, but noted in a report earlier this year that Spain needed to confront a number of concerns surrounding the issue:

Particularly challenging is political corruption and deficient checks and balances, notably in public spending and control mechanisms at regional and local levels“, the report said, adding “that irregularities in public procurement procedures at regional and local levels should be addressed further”.

The Popular Party has received praise in international circles for the budgetary adjustments undertaken since the beginning of the 2008 crisis. The PP´s 2012 labour reform heavily realigned the position of the country´s workforce, with the result that employment conditions are now much more precarious for employees in the labour market.

The result has been a steep rise in short-term contracts which has added to pressure in Spanish households. With unemployment currently standing at 23.67%, Spaniards are justifiably irate at the deluge of allegations against their elected leaders.

The latest accusations involve a range of officials, builders and contractors from across Spain. High court judge Eloy Velasco issued arrest warrants this week against 51 officials and business people from Madrid, Valencia, Leon and Murcia. It is alleged that those involved were part of a scheme in which politicians awarded €250 million worth of public contracts in exchange for kickbacks.

The most high profile of the arrests was that of that of Francisco Granados, the former deputy head of the Madrid branch of the Partido Popular. Granados is alleged to have accumulated over €5.8 million, held in Swiss banks accounts, along with a business associate who worked in the construction sector. The president of the PP Madrid branch, Esperanza Aguirre, moved to distance herself from Granados on Monday, insisting on her “deep shame” concerning the actions of a man she has worked closely with for some years.

Twenty four hours later, Prime Minister Mariano Rajoy went before parliament to “apologize in the name of the PP to all Spaniards for having appointed people to positions who weren’t worthy of them and who seem to have taken advantage of them.”

The revelations are the latest in a spate of cases which have effectively touched every strand of political life in Spain. The former head of the Catalan parliament, Jordi Pujol, is under investigation having allegedly siphoned money from government contracts into offshore accounts. His youngest son, Oleguer Pujol, was charged earlier this year with influence peddling. Another son, Jordi Jr, is accused of carrying bags of cash-up to €32 million euro-across the border, to stash in accounts in Andorra.

The most far reaching investigation to date is what has become known as the Gurtel case. The investigation began in 2009, and prosecutor Pablo Ruz has already established large amounts of fraud, embezzlement and bribery on the part of Spanish politicians and business associates.

The PP appears to be the party with most to lose from the Gurtel investigation. At present, prosecutors have already uncovered an offshore slush fund which was used by various party figures, which was amassed through bribes and kickbacks. The fund was found to have contained €48 million.

Luis Barcenas, the former treasurer of the PP, is currently behind bars, awaiting trial having orchestrated and distributed the proceeds from the fund to various PP members around Spain. Barcenas´ notebooks allege that Rajoy himself received €323,231 from the fund between 1997 and 2008. Rajoy denies he received any such money.


Before now, Valencia was seen as Spain’s modern ode to corruption and skullduggery. Over the past decade alone, politicians have awarded exorbitant contracts for public necessities such as a new theme park at a cost of €330 million, an airport which has never been used for €150 million, a half built and an unoccupied football stadium for the local team that cost €98 million. Spaniards have been left exasperated by the length of time it has taken to bring those involved to justice, a sense of grievance fuelled when the Valencian authorities had to go cap in hand to the central government for a bailout in 2012.

In Andalusia, where youth unemployment stands at 66.1 %, the ERE case uncovered a network of illicit payments that went to politicians and officials from a fund earmarked for laid-off workers. The investigating magistrate has estimated that a total of €136 million was misappropriated in the scheme. The highest profile figure to be implicated was the former Public Works Minister of the socialist government Magdalena Alvarez. In March of this year, the investigating judge ordered her to pay €29.5 million in a civil bond to cover her potential liabilities in the case. Alvarez currently serves as vice-president at the European Investment Bank.

The latest scandal focuses right on the heart of the country, and indeed the ruling party in Government. The Madrid branch of the Popular Party have been rocked by the allegations, and a decision taken this week to suspend the accused appears a rather desperate attempt to save some face with the electorate.

This week, Oxfam Intermon announced that the 20 richest Spaniards now control the same amount of wealth as the country´s poorest 14 million. It is a figure that has added to the sense that Spain is increasingly a stratified country of “us” and “them”.

How damaging the latest corruption case will be remains to be seen. For now, Spanish politicians have managed to evade the attentions of their European counterparts.  Spain has been doing its homework.  Labour reforms have been implemented. Debt to GDP ratios are being met. Necessary budgetary adjustments have been made. For Spaniards, the irony is becoming unbearable.



About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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