Rajoy Falls, Paying Price for Generation of Corruption in Spain

(Bloomberg) -- Spanish Prime Minister Mariano Rajoy was defeated Friday, overwhelmed by the drumbeat of corruption revelations that has grown throughout his seven years in office.

Rajoy, 63, was ousted by a no-confidence vote in Parliament after the anti-establishment group Podemos and Catalan separatist groups lined up behind Socialist leader Pedro Sanchez. Sanchez is due to be sworn in as premier by King Felipe in the coming days.

In a brief speech to parliament before the vote, Rajoy accepted defeat and wished his successor well. “I will accept as a democrat the result of the vote as it is well-known,” Rajoy said. “I can’t agree with what has been done.”

Elected by a landslide in 2011 as Spain’s property crash spiraled into a full-blown financial crash, Rajoy took a European bailout to fix the country’s banking system and laid the foundations for an economic rebound that’s now in its fifth year.

Catalans and Corruption

But the seeds of his demise were there from the start. His 2010 legal challenge to new powers for the Catalan government triggered a resurgence in separatism that would fatally damage his authority seven years later when the region threatened to break away from Spain. And prosecutors were already investigating the PP corruption racket that ultimately forced him out.

“He leaves Spain with a more divided society and a political culture that has suffered great damage,” Alejandro Quiroga, professor of Spanish history at Newcastle University, England, said. “The corruption has been brutal.”

Rajoy is the last of a generation of conservative politicians who shaped modern Spain for good and ill. He was at Jose Maria Aznar’s side as the PP’s first prime minister fanned the second economic boom since Spain’s return to democracy in in 1978.

Rajoy served as minister of public administration, then education, interior and eventually deputy prime minister. In 2003, Aznar handed over to him as party leader. According to a verdict by the National Court last week, officials at party HQ in Madrid were already taking kickbacks from companies seeking public contracts.

‘M. Rajoy’

Since those days, Rajoy has survived two election defeats as party leader, an EU rescue and even a helicopter crash. But the specter of corruption was creeping closer.

In 2013, El Pais newspaper published ledgers from a secret party slush fund that showed regular payments to “M. Rajoy.” El Mundo printed text messages in which the prime minister promised to do whatever he could to help former party treasurer Luis Barcenas, who was caught up in the corruption probe. Rajoy denied any wrongdoing.

In 2014 he apologized in parliament for what he recognized then was an “accumulation of scandals.” His colleagues from the Aznar government helped fuel the perception of a party gone rotten.

Former Finance Minister Rodrigo Rato was handed a jail term for the misuse of corporate credit cards while leading Bankia SA to the brink of a collapse that forced the government to seek 41 billion euros ($48 billion) in European bailout funds. Aznar’s former Labor Minister Eduardo Zaplana was arrested this month on money laundering and bribery charges. His family has said he’s done nothing wrong.

Minority Government

Stripped of his majority in 2015, Rajoy refused to step aside in favor of a less divisive candidate, and eventually reclaimed power after a 10-month standoff and a repeat election, albeit at the head of a fragile minority government.

Any chance of a broader resurgence was cut short by former Catalan President Carles Puigdemont’s declaration of independence last October. While the break away attempt foundered, voters identified the Ciudadanos party as a more capable defender of national unity and the PP slipped behind in the polls.

Rajoy still managed to steer the delayed 2018 budget through parliament last week, apparently clearing a path to preside over two more years of economic growth.

When his luck changed, it did so quickly.

Swift End

The National Court handed down a string of dramatic sentences against former PP officials including Barcenas who was sent to jail for 33 years for his part in the PP racket -- and the judges said they didn’t believe Rajoy’s testimony in which he said he had no knowledge of the operation.

The ethics of the prime minister and his party were back in center stage. Sanchez filed his no-confidence motion. The corruption that had dogged Rajoy’s premiership finally brought about his downfall, though the Catalans took relish as they got to wield the knife.

“This shows that you can’t govern Spain against the will of the Catalans,” separatist lawmaker Carles Campuzano told parliament. “We’re voting in favor of this motion to bring an end to the Mariano Rajoy era.”

--With assistance from Esteban Duarte and Maria Tadeo.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Ben Sills, Zoe Schneeweiss

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