Spain: Ruling party shaken by ex-IMF boss's downfall

Rodrigo Rato, former Spanish deputy prime minister and head of the IMF, being detained by police.

A central pillar of the Spanish economic and political establishment came crashing down on Paril 16.

Rodrigo Rato, former deputy prime minister in the 1996-2004 People’s Party (PP) government of Jose Maria Aznar and head of the International Monetary Fund from 2004 to 2007, was detained on suspicion of tax evasion, concealment of assets and fraud.

At the same time, it became public that Rato had also taken advantage of a 2012 amnesty for tax cheats. The former treasurer is being detained, but TV coverage of Rato being pushed into a police car continues to dominate discussion in bars and on social media.

Many commentators judge that his detention marks a turning point in Spanish politics. In this country of squalid political operators and corrupt bankers, the former treasurer has long been the main target of popular outrage.

As former CEO of the bankrupt and bailed-out bank Bankia, he symbolises what radical anti-austerity party Podemos calls the “caste”: the kleptocratic clique of bent politicians and sleazy money men — “sausages” in local parlance — that runs the Spanish state.

Recently, when fellow passengers recognised Rato on a flight from Switzerland to Madrid, spontaneous cries of “pay your taxes”, “thief” and “sausage” filled the cabin.

In November 2013, when David Fernandez, member of Catalan parliament for the Popular Unity Candidacies (CUP), threatened to throw his sandal at Rato at a parliamentary inquiry into Catalonia’s bankrupt credit unions, his popularity took off.

“See you later, gangster — down with the mafia,” was how Fernandez, sandal in hand, ended his intervention.

Who is Rato?

Unlike the scores of PP mayors and regional ministers who have been uncovered awarding juicy public contracts to their mates or developers prepared to pay a cut into PP coffers, Rato is not your run-of-the-mill “sausage”.

As treasurer, he was the central figure in the restructuring of the Spanish economy that took place under Aznar. This was Spain’s Thatcherite phase, when a vast program of selling off state assets was used to create a “people’s capitalism” based on share issues in the newly privatised enterprises.

Rato would make always-heeded suggestions as to who should be the CEO of these nominally autonomous firms. Under his guidance, the state-dominated economy inherited from the 1939-76 Franco dictatorship was finally turned into today’s “capitalism of mates”.

At the same time, the economic foundation of share-owning middle-class support for the PP — Europe’s biggest political party — was laid.

The process was also used by the Spanish-centralist PP to lessen the economic weight of the Basque and Catalan business elites. Under Rato, Basque capitalism lost control of the BBVA, Spain’s second biggest bank. Catalan energy giant Gas Natural was blocked from merging with its Basque equivalent Iberdrola and then from taking over Endesa, the once state-owned Madrid-based energy giant.

During the 2001-2007 real estate bubble (or “Spanish economic miracle”), Rato was treated as a demi-god by all wings of the establishment. His advice was heeded by all, including the Spanish Socialist Workers Party (PSOE) government that defeated Aznar in 2004.

Today Rato is no longer a member of the PP, which is pretending this private citizen, reputedly worth €26.6 million, has nothing to do with a party and government whose prime minister once called him “Spain’s best-ever treasurer”.

Yet if Rato is not quintessential PP, no one is. Child of a wealthy Asturian family, his father was a enthusiastic supporter of Nazism and the Franco dictatorship, despite later falling out with Francoism when he was found guilty of funnelling money to Swiss tax havens.

In 1982, the young Rato was set up with a safe parliamentary seat by PP godfather and former Franco minister Manuel Fraga, putting him on the road to a copybook “brilliant career” in banking and politics.

By 2003, after his reboot of Spanish capitalism and Spain’s entry into the euro, Rato was scheming to succeed the retiring Aznar as prime minister.

Aznar, however, preferred the present Spanish prime minister Mariano Rajoy. He suspected Rato’s business dealings and resented his doubts over the Aznar government’s backing of the 2003 Iraq war.

Rato’s consolation prize was to become IMF managing director. Since then, his balloon has steadily deflated, despite continuing to hold directorships on the boards of several Spanish multinationals.

“Ratoism”, however, survives: his closest collaborators maintain key positions of power within the Rajoy government. They include treasurer Luis de Guindos and finance minister Cristobal Montoro.

A doomed PP?

Can the PP, already trailing Podemos in some opinion polls, withstand the shock wave set off by the Rato case?

With critical May 24 municipal and regional elections approaching, Podemos could not have dreamt of being handed so much ammunition. The latest gift is the news that Rato has allegedly been involved in funnelling funds through Gibraltar to dodge possible personal liabilities from the collapse of Bankia.

The Rato case comes as the PP is already up to its eyebrows in potentially destructive scandals. For example, Rato himself has already admitted that as Bankia CEO, he sanctioned the bank issuing “dark” credit cards for board members to access illicit credit.

This scam took place when Bankia, itself a merger of seven credit unions that went broke when the real estate bubble burst, was itself actually bankrupt. For many small investors in Bankia, many of them PP voters, the subsequent collapse in its share price after its 2012 bailout will never be forgiven.

And what if the case of former national PP treasurer Luis Barcenas again explodes? This top functionary has been charged with running a double set of accounts for the PP — one for the agency supervising party-political finances and a real one — and with arranging brown-envelope payments to various party luminaries.

Barcenas has maintained all along that the topmost party echelons were in on the scam.

Barcenas’s trial has been put back to after the November national election. But there is no guarantee that highly compromising details won’t leak in the meantime, as more moles seem to be appearing among senior public servants who sniff that their present political masters may well be on the slippery slope to oblivion.

Inside job?

In the paranoid universe of Spanish political commentary, more than a few observers claim Rato was knifed by former PP mates in a desperate effort to create a contrast between a supposedly clean Rajoy government and its soiled predecessor.

It comes in a context where only four of the 16 members of the last Aznar cabinet have not been charged or investigated for corruption-related offenses.

How come, they ask, did only Rato’s name surface from the list of 715 participants in the 2012 amnesty for tax cheats who were afterwards investigated by the national tax agency? Against PP opposition, every other parliamentary party is demanding this list be made public.

Another theory claims the leak is part of an anti-Rajoy operation within the PP. The plan is supposedly to produce such an electoral disaster, that Rajoy will have to step down as leader.

However, neither of these interpretations seem credible. They imply a degree of planning and control of events impossible for any player in today’s turbulent Spanish political scene.

As the bipartisan PP-PSOE status quo comes apart, all forces, including the besieged Rajoy government, are being forced to improvise in the face of unpredictable shocks.

Yet one thing is certain — a radical decomposition of the PP is now thinkable. This is most of all confirmed by the panic attacks affecting its legions of ministers, councillors and government appointees.

End of the regime?

The end-of-regime sensation is starting to grip the passengers on the PP gravy train. Last week, the PP premier of Galicia, Alberto Nunez Feijoo, admitted to “dressing-room tensions” in the party.

The Rajoy government’s strategy for survival involves loud boasting about an economic “upturn” (which has actually destroyed over 100,000 full-time jobs), blaming the previous PSOE government for all the social pain and denouncing Podemos as dangerous amateurs who will wreck the recovery.

It has become clear to all, especially since the PP lost 500,000 votes in the March 22 regional election in Andalusia, that this is not selling.

Partly this is because whatever benefits there have been from the miserable recovery have gone to those who least need them, with the “good news” largely restricted to the finance sector. But mostly it is because no one believes the “few rotten apples” theory any more. After all, if Rato is a crook, who isn’t?

Telling signs include some desertions of PP councillors and mayors to Citizens, Spanish centralism’s “spare wheel” party, and growing mutterings in big business circles.

Some members of the economic elite have taken to wondering out loud if the Rajoy government is the solution to the critical problems of the Spanish economy and state, especially given the threat from the Catalan independence movement.

Off-the-record comments from business figures after an April 21 lunch between Rajoy and Spanish-Catalan business lobby representative Puente Aereo revealed the PM had nothing new to say beyond his obsessive message that only the PP could be trusted to nurture economic recovery.

The Catalonia crisis? Nothing. Rato? Rajoy learned about it in the papers.

The PP's vast political patronage machine will not go down without a fight to hold onto its spoils of power and privilege. But the Rato case may well have delivered it a mortal blow.

[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona. A more detailed version of this article will soon be available at .]

Like the article? Subscribe to Green Left now! You can also like us on Facebook and follow us on Twitter.