Spain backs anti-graft laws as Rajoy tries to clean party image

By Sonya Dowsett MADRID (Reuters) - Spain's parliament approved two long-delayed anti-corruption laws on Thursday, a day after a minister resigned, the first government casualty of a series of graft scandals. Prime Minister Mariano Rajoy urged Spaniards to have faith in the honesty of their politicians, as he tried to limit damage to his conservative People's Party (PP) before parliamentary elections next year. "I can understand the irritation and distrust of our citizens but suspicion should not be levelled at everyone," he told parliament. "Most politicians are decent people. Spain is not corrupt." Health Minister Ana Mato resigned on Wednesday after an investigating judge said she had benefited from a kickback scheme which directly involved her ex-husband, once a PP mayor. Mato protested her innocence in her resignation statement, and Rajoy defended her in a heated parliamentary session, noting she had not been charged with any crime. In 2009, Spain's High Court charged Mato's former husband, Jesus Sepulveda, one of dozens of PP members charged in the case, with receiving around 500,000 euros ($625,000) in kickbacks in exchange for public contracts. Support is ebbing away from both the PP and the main opposition Socialists, while the newcomer Podemos ("We can") party soars in opinion polls on an anti-corruption platform. Mato's resignation saved Rajoy the embarrassment of having to present the two laws while she was still in his government. However the PP confirmed that Mato had not resigned her parliamentary seat nor her seat on the party's executive board. REGENERATE SPAIN Neither of the corruption laws is new; they were stalled in parliament for months as the PP sought consensus with other parties and to incorporate amendments. One covers party financing and the other aims to prevent conflicts of interest in government roles. Other parties chose not to cooperate with the PP, saying it lacked legitimacy to fight corruption as an investigation known as the Gurtel case could land three former PP treasurers and other party members with jail sentences. Socialist leader Pedro Sanchez said the PP had been irrevocably tarnished. "You are in no position to regenerate Spain against corruption," he told Rajoy in parliament. "You are not able or legitimate to lead." The government used its majority in the lower house to push them through on Thursday without amendment. The bills must now be approved by the upper house, where Rajoy also has a majority. "This case is like a set of Russian dolls... There is always another revelation," said Joan Queralt, law professor at the University of Barcelona. Rajoy had no choice but to make Mato resign as she had become a liability to the party, he added. Mato faces questions from the judge on whether she knew of the provenance of gifts to her family such as hotel stays, flights and luxury goods alleged to have been given to her ex-husband in return for public works contracts. The political winner is Podemos. It has drawn voters disillusioned with the parties that have dominated politics since Spain's return to democracy in the late 1970s. With Spaniards also weary after years of economic crisis, Podemos would come a close third in a parliamentary election, a recent opinion poll indicated. "For the PP, it's true that a very small portion of their voters are going to Podemos but what most matters for them is abstention," said political analyst Antonio Barroso of consultancy Teneo Intelligence. "With every single PP corruption case, it's going to be harder for Rajoy to lure those voters back." The party financing law will ban legal and corporate entities from making donations to parties, and banks will no longer be allowed to cancel parties' debts or negotiate with them interest rates that would be below market levels. (Additional reporting by Elisabeth O'Leary; Editing by Julien Toyer, David Stamp and Robin Pomeroy)