Spain PM admits error of trust in corruption scandal

Spain's Prime Minister Mariano Rajoy admitted for the first time today he made a mistake in trusting a party colleague at the centre of a major corruption scandal but denied any wrongdoing and vowed to stay in power.

Rajoy, 58, was in fighting mood as he appeared in parliament, pouring scorn on calls for his resignation over allegations surrounding his ruling Popular Party's disgraced former treasurer, Luis Barcenas.

"I made a mistake in maintaining confidence in someone who we now know did not deserve it," said Rajoy, who for months had resisted even pronouncing Barcenas' name in public.

The grey-bearded prime minister said he was appearing before the special session of parliament to "refute the lies, manipulations and malicious insinuations encouraged by certain political leaders".

The Spanish leader said his conservative Popular Party did pay its officials extra money in addition to their salaries for "work done". But he denied allegations that he received illegal payments from his party and said he paid taxes on all income.

"Nothing related to this matter has prevented me, nor will it prevent me from governing," the prime minister told parliament, which opened with one minute of silence for the 79 people killed in a July 21 train derailment near Santiago de Compostela in northwestern Spain.

Rajoy, who took power after leading his party to a landslide election win in November 2011, said ledgers published in the press supposedly showing slush fund payments to him and other party members were "an astonishing and imaginary collection of falsehoods".

The affair threatens to destabilise his government which is battling to strengthen the public finances of the eurozone's fourth-biggest economy, anxiously watched by its neighbours.

The opposition Socialists reiterated their call for Rajoy to step down, insisting that the party slush fund allegations were accurate.

"Mr. Rajoy, you did not tell the truth to the Spanish people. You did not tell the truth when you said that it was all false," Socialist Party leader Alfredo Perez Rubalcaba said.

"You are doing damage to Spain. For that, I ask you to go. I ask for an act of solidarity with a country that cannot suffer for having at its head a prime minister like you.