Merkel gives Rajoy backing on reforms

A political fundraising scandal handed power to Angela Merkel but, welcoming Spanish leader Mariano Rajoy to Berlin yesterday, the German chancellor declined to draw any comparisons to the slush-fund allegations against his People’s Party (PP) that might force him from office.

Instead Dr Merkel insisted she had “full confidence” in his government’s continued appetite for reforms sparked by the euro zone crisis.

“I’m convinced that the Spanish government and Mariano Rajoy as prime minister can resolve this task, and Germany will help him with all of our strength,” Dr Merkel said.

Stark contrast

Mr Rajoy’s inaugural visit – full military honours and a joint cabinet meeting – was a stark contrast to calls in Madrid for him to resign over allegations of involvement in the PP scandal.

“The things I’m accused of are false,” he told journalists. “I still have same desire, force, courage and determination . . . to overcome one of the most difficult situations Spain has gone through in 30 years.”

His assertions have a familiar ring to German ears. In 1999 the conservative Christian Democratic Union (CDU) was embroiled in a scandal involving two million Deutsche Marks in illegal donations. Former chancellor Helmut Kohl refused to name his donors, prompting Angela Merkel to attack him for “damaging the party” with his “illegal activities”. The party distanced itself from Dr Kohl, dumped his successor as party leader, Wolfgang Schäuble, and installed Dr Merkel.

Yesterday Mr Rajoy insisted his PP party was a “stable government with a clear majority”. He welcomed an investigation into the affair and said he would publish his tax declarations on the internet.

On EU reforms, he said restructuring of Spain’s crisis-hit banking crisis would be “completed shortly”, allowing credit to flow again into the real economy.

Yesterday’s latest review by the European Commission and European Central Bank confirmed that reforms of Spain’s financial sector remained on track and that “important progress” had been made in establishing a state-run bad bank, Sareb.

However, the report warned of continued risks to the Spanish economy and financial sector because of high jobless and debt rates.

In Berlin, the two leaders discussed the final preparations for this week’s EU summit, set to discuss the seven-year budget.