MADRID - Spanish Prime Minister Mariano Rajoy on Monday rejected calls for his resignation over a ruling party financing scandal and said he would not allow the matter to deter his reform plans.
The pressure mounted on Rajoy as the former treasurer of his People's Party gave new testimony before a judge looking into the affair, saying he handed envelopes of cash to Rajoy and other party leaders in 2008, 2009 and 2010.
Rajoy has so far limited the impact of the scandal, which involves alleged illegal donations by construction magnates that were supposedly distributed as cash payments to party leaders in return for juicy contracts.
Speaking at a news conference on Monday, he said: "I will defend political stability and I will fulfil the mandate given to me by Spanish voters."
He said the scandal would not derail his political reform programme, aimed at combating a deep recession and a huge hole in the budget.
But the opposition demanded he quit, and some members of his own party also said it was time for him to go.
"The PP may have an absolute majority but it has lost moral authority," said the opposition Socialists' Deputy Secretary General, Elena Valenciano. "We are going to work with all the parties to make the prime minister step down."
At the heart of the scandal is former party treasurer Luis Barcenas, 55, who was jailed in June and charged with bribery, money laundering, tax fraud and other crimes.
A High Court judge questioned Barcenas behind closed doors for more than three hours on Monday after he was transported from jail in a white and black van.
A lawyer involved with the case told Reuters that Barcenas, a once-trusted aide, turned over documents showing how he ran a secret slush fund at the party for many years, and provided details of years of cash payouts to party leaders.
Over his more than 20 years handling PP finances, Barcenas accumulated as much as 48 million euros in Swiss bank accounts that prosecutors say he has failed to adequately explain.
Rajoy is not charged with any crime and has repeatedly denied that he or other party leaders received illegal payments.
However, text messages between Rajoy and Barcenas published in El Mundo newspaper over the weekend showed the two were personally in touch as recently as March and that the prime minister tried to limit potential damage from the former party official, who he made treasurer in 2008.
Rajoy on Monday acknowledged the text messages were genuine and said they showed that he had not caved to blackmail from Barcenas.
Inside the PP, politicians are increasingly convinced that Rajoy is losing the credibility he needs with voters tired of high unemployment. Support for the party has dropped to 25 per cent from 44 per cent in the 2011 general election, according to a poll by Metroscopia.
"Almost everyone in the party is convinced that the situation is beyond repair. The best option for Rajoy is to organise a process of handing over leadership to someone else in the party," said a PP member of parliament, who asked not to be named.
Another party insider, who also asked not to be named, said Deputy Prime Minister Soraya Saez de Santamaria is one person who could succeed Rajoy because she is seen as a newer generation of party leaders not touched by the Barcenas scandal.
Under Spain's constitution parliament can choose a new leader without calling an election.
Rajoy is known for his cautious political strategy in which he wears out opponents with a waiting game.
However, the Socialists, who polls show have 22 per cent support, down from 31 per cent in the 2011 election, have little to gain by forcing a dissolution of Parliament.
"The Socialists don't have the seats to call for a vote of no confidence," Carlos Floriano, deputy secretary of the PP said at a news conference on Monday afternoon.
Rajoy has resisted calls from the opposition to answer questions about the Barcenas scandal in Parliament.