The Spanish scandal that I mentioned earlier in the week continues to slowly blossom into a political crisis. The Spanish newspaper, El Pais, has published evidence that between 1990 and 2009 members of Rajoy’s ruling party ran special accounts in order to hide payments from business people and make payments to party members. Many members, including Mariano Rajoy himself, along with former IMF head Rodrigo Rato are implicated in the scandal. The party has issued a denial of the allegations claiming all payments were above-board, but given the party’s former treasurer, Luis Bárcenas, was discovered to have a secret swiss bank account containing €20m recently I’m not sure anyone is going to believe it.
More from Reuters:
Spain’s ruling People’s Party denied on Thursday that Prime Minister Mariano Rajoy and other leaders received payments from a slush fund after a newspaper published what it said were secret party accounts.
El Pais published images of excerpts of almost two decades of handwritten accounts that it said were maintained by People’s Party treasurers. The newspaper said the accounts showed 11 years of payments to Rajoy of 25,200 euros ($34,200) a year.
The accounts – which El Pais said amounted to a parallel unofficial bookkeeping system – indicate donations from companies, mostly builders, and regular payments of thousands of euros to a number of party leaders.
The report is the latest twist in a scandal that has damaged the credibility of 57-year-old Rajoy as he battles a deep recession and one of Europe’s highest unemployment levels.
Rajoy – a longtime politician widely thought of as boring but honest – has demanded sacrifices of Spaniards as he slashed public spending to avert a fiscal crisis that could push Spain into an international bailout.
Obviously, given the current state of the Spanish economy and the on-going austerity, this is now a huge political problem for the Spanish government. Very high and rising unemployment, failing industrial production and weakening GDP are difficult enough to deal with, but if the citizens have no faith that the government is sharing the burden its very difficult to see how this isn’t going evolve into a full-blown crisis.
In the meantime the latest data from the Eurozone continues to show further economic retrenchment in the periphery. Greece, like Spain, continues to weaken and, even after 5 years of recession, the country is still searching for the bottom:
Already reeling from big falls in sales during the Christmas and New Year’s holiday period, the news for Greek retailers was even bleaker with the news that their sales in November of 2012 dropped off a cliff, falling 16.9% percent, heightening the likelihood that many more will go out of business this year.
The data came from the Hellenic Statistical Authority, (ELSAT) which showed consumer confidence was deader than a store mannequin with austerity-weary Greeks keeping their wallets in their pockets as the government readies to lower the boom with more pay cuts, tax hikes and slashed pensions.
Some 68,000 stores have closed in the nearly three years since the government began imposing harsh conditions on the order of international lenders putting up rescue loans to keep the economy from collapsing. The country is now in a sixth year of a deep recession with no signs it is going to relent despite rosy predictions from the government a recovery will begin later this year.
The Eurozone’s Retail PMI followed the earlier Flash PMI for manufacturing and services upwards in January, but remained well below the neutral threshold of 50.0 as the sector clearly remains a major drag on the region’s economy. The current downturn in month-on-month sales revenues looks set to be the longest over the survey’s nine-year existence.
“The main positive from the latest data was a return to growth in Germany, as its Retail PMI hit a seven- month high. This did not, however, provide much of a smokescreen for the underlying weakness in both France and Italy, where consumers continued to rein in spending.
More manufacturing PMI data will be released tonight, I expect it to show further divergence between Germany and the rest of the zone.