Spain’s Corruption Scandals: The Crisis of the Royal Family

The king was once among the most admired people in the country but now his son-in-law has tarnished the crown. Can another royal lead the way out?

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David Ramos / Getty Images

Princess Cristina's husband Iñaki Urdangarin arrives at the courthouse of Palma de Mallorca, in Spain, on Feb. 23, 2013

Walking into the courthouse in Palma de Mallorca on Saturday, Iñaki Urdangarin must have recognized the irony. On Feb. 23, 1981, his father-in-law, King Juan Carlos, had played a very visible, very critical role in stopping a military coup d’état intended to return Spain to an authoritarian regime. The King’s actions that night not only helped the fledgling democracy survive its first serious crisis but also secured the reputation of the monarchy for decades to come. Now, on exactly the same date some 32 years later, Urdangarin was helping undermine it.

Over the weekend, Urdangarin returned to court to testify in a case that charges him with influence peddling and graft. As one of several major corruption cases currently gripping the nation — another revolves around the surprisingly inflated Swiss bank accounts of Luis Bárcenas, former treasurer of the ruling Popular Party (PP), and the off-the-books payments to high-ranking party members that he allegedly helped organize — it contributes to a growing sense among Spaniards that their political system no longer works. The question now — one that has implications not only for Spain’s current political leaders but also for the very future of its democracy — is whether anyone has the position or will to fix it.

Earlier in the week, Prime Minister Mariano Rajoy tried to suggest that he did. Addressing parliament in his first State of the Nation debate, he outlined an anticorruption plan that would include a new transparency law and require party treasurers to testify annually about their accounts in parliament. But he failed to generate much enthusiasm for his proposals. “There was nothing new there,” says Victor Lapuente, a political scientist at the University of Gothenburg’s Quality of Government institute, in Sweden. “He said what is always said in Spain whenever there’s a problem: appoint a commission.”

(MORE: Spanish Monarchy’s Popularity Hits New Low)

Rajoy also has a credibility problem. His name — along with that of nearly every high-ranking party official — appears in secret accounts supposedly kept by Bárcenas. Those books show that party members regularly received under-the-table payments, purportedly funded by corporations and private individuals; in Rajoy’s case, the notes suggest he received €25,200 ($33,000) annually from 1997 to 2008. Denying the veracity of the books, PP secretary general María Dolores de Cospedal insisted that the party was the target of a conspiracy. Yet last week it came to light that although he resigned in 2010 (in the wake of a different corruption indictment), Bárcenas remained on the PP payroll until Jan. 31, 2013. That was the same day that the newspaper El País published the secret records attributed to him.

Although polls show falling support for the PP, no one within the party has emerged to challenge Rajoy’s control. Nor has any other party. Opposition leader Alfredo Pérez Rubalcaba gave his own uninspired address during the State of the Nation debate, and his Socialist Party has had its own corruption troubles. “The opposition is tainted as well,” says Lapuente. “There are a lot of people out there — middle class, educated, liberal democrats — who see the problems and want a clean government but can find no party that represents them. They’re political orphans.”

The sense of disillusionment extends to the monarchy. For decades after he effectively ended the coup by going on television to assure the country that the rebel officers holding parliament at gunpoint did not have his support, King Juan Carlos enjoyed high approval polls and preferential treatment from the press. But in the past couple of years, public perception of him, especially among young people with no memory of that night, has shifted. Although no public-opinion polls about Juan Carlos have been conducted since October 2011 (when, for the first time, his approval ratings dropped below 50%), in a recent survey 57.8% of 18- to 29-year-olds said they would like Spain to be a republic rather than a constitutional monarchy. An expensive hunting trip to Botswana, during which he broke his hip and had to be flown on an emergency flight back to Spain, helped erode Juan Carlos’ personal prestige, coming as it did during the economic crisis. But even more damning has been the indictment of his son-in-law.

Charged with using his connections to win inflated public contracts for his Nóos Institute, a purportedly not-for-profit organization that arranged sports, cultural and tourism events, Urdangarin is also being investigated for the alleged embezzlement of some €8 million ($10 million) from those contracts. Throughout the scandal, the palace has maintained that it knew nothing about the questionable dealings, and in court on Saturday, Urdangarin testified that neither his wife the Infanta Cristina, who sat on the board of Nóos, nor his father-in-law the King had any knowledge of the institute’s workings. But e-mails surrendered to the court by Urdangarin’s former partner, Diego Torres, who is also under indictment, suggest that the King was kept well informed of his son-in-law’s activities.

(MORE: Why Juan Carlos’ Reign in Spain Has Become a Royal Pain)

The King cannot be tried under Spanish law, and so far, the court has maintained that there is not enough evidence to indict his daughter. But the case is clearly having an impact; a poll conducted by Metroscopia for El País shows that 88% of the population believe the Urdangarin case is damaging the monarchy. “The palace hasn’t known how to confront this crisis,” says University of Zaragoza historian Julián Casanova, author of A Short History of the Spanish Civil War. “I don’t know if they did when the coup d’etat happened in 1981 either, but back then there was at least a sort of unanimity surrounding the monarchy. There wasn’t a republican movement. Now there is, and it’s growing all the time.”

Yet ironically, one of the few figures in Spain who has both the prestige and popularity to effect change and is — at least until now — untainted by corruption is himself a royal. Educated at Georgetown University, in Washington, D.C., the 45-year-old Prince Felipe is next in line for the throne, and along with his mother Queen Sofia, is the only royal who hasn’t seen his approval ratings plummet. Provided he himself is not implicated in the Nóos case (some documents include his name on the institute’s board), a willingness to open up the palace to public scrutiny — and to call on the political parties to do the same — could jump-start a broader political renewal. “He’s untested and he hasn’t given signs of where he stands on these issues,” says Casanova. “But he has the credibility. It’s the one thing that could change the fate of the monarchy, and maybe change things in general.”

There’s no doubt that Spaniards want change. On Feb. 23 — a date chosen for its historic significance — hundreds of thousands of them poured into the streets for nationwide demonstrations. The protests had originally been billed as antiausterity, but there were plenty of republican flags on display, plenty of posters that equated “My Cuts” with “Your Envelopes” (a reference to Bárcenas and his predecessor’s preferred method of allegedly distributing cash payments) and plenty of cries for Rajoy to “imitate the Pope!” Taken together, they were telling signs that a second crisis in Spanish democracy is under way. But this time, at least so far, no one has appeared to lead the way out.

MORE: Spain Is Disgusted with Corruption, but Can Anything Be Done About It?