Political crises in Spain and Portugal worry investors

Political crises in Spain and Portugal worry investors

LONDON - Spanish Prime Minister Mariano Rajoy has rejected opposition calls for his resignation following the release of text messages between him and a former senior politician who is under investigation for fraud and money- laundering.

"The great benefit our country has right now is political stability, and I am going to defend it," he vowed.

But Mr Rajoy's political survival hangs by a thread as Spain suffers from a growing backlash against the pain of economic austerity, which also threatens to topple the government in neighbouring Portugal.

Either one of these flashpoints could spook financial investors, precipitating a rekindling of the euro crisis.

The Spanish scandal, which involves alleged illegal donations to politicians, started in January, when Mr Luis Barcenas, the former treasurer of the ruling centre-right Popular Party (PP) was accused by state prosecutors of acting as a conduit between politicians and construction magnates who offered cash in return for contracts.

The latest twist in the saga is that Mr Barcenas has now fingered Mr Rajoy as an alleged recipient of two ¤90,000 (S$148,300) cash payments.

More damaging still is evidence that the prime minister was apparently trying to calm Mr Barcenas down by sending him phone messages.

"Luis, I understand. Keep courage. I will call you tomorrow. A hug," read one of these texts, allegedly sent in March.

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