UPDATE 1-Spain's Rajoy calls on Europe for growth policies

Wed Apr 3, 2013 7:33am EDT

MADRID, April 3 (Reuters) - Spain's prime minister called on Wednesday for Europe to adopt growth policies to balance austerity and issued a veiled demand for Germany to boost spending.

In a one-hour televised speech to leaders of his People's Party (PP), Mariano Rajoy also dismissed accusations of widespread corruption in Spain.

"Countries that can afford it should spend more," he said, a code he has used in the past to call on Germany, the only big European country with spending capacity, to implement more expansive fiscal policies.

"Europe is the only region in the world in recession. To overcome this situation we need three things: every country needs to do its homework, we need more (European) integration and we need growth policies," Rajoy said.

Rajoy also said the Spanish economy would clearly grow in 2014 while 2013 would remain tough, a slight change from previous speeches when he insisted Spain would return to growth at the end of the year.

A government source told Reuters on Monday that Spain would revise down its economic growth forecast for 2013 in April and seek more time from the European Union to reduce its budget deficit as a recession cuts deeper than previously expected.

Spain's gross domestic product (GDP) will be forecast to shrink by 1 percent, rather than 0.5 percent, the source said, adding that the government intended to shift emphasis to growth rather than deficit reduction.

Spain is also negotiating with the European Commission for more time to bring its deficit within 3 percent of GDP, something it is currently expected to do by 2014, the source said.

Rajoy's meeting with party leaders had been due for several weeks. He has elicited complaints from some of them regarding what they see as a weak reaction to a corruption scandal involving three former treasurers of his party.

Spanish daily newspaper El Pais in January published papers it said were ledgers kept by former party treasurer Luis Barcenas from 1990 to 2009 showing the party used backhanders from companies to top up the salaries of party members, including Rajoy.

A High Court examining magistrate has opened two investigations into the allegations. Rajoy and Barcenas have denied any wrongdoing.

The case has added to Spaniards' suspicions of deep rot now afflicting the democracy that emerged some 35 years after the death of General Franco.

Rajoy dismissed claims of widespread corruption in the country, saying Spain was no different from any other European state, adding he would fight against corruption cases in his party and others.

Since the scandal involving the PP started in January, Rajoy has reduced his public appearances, including before the parliament, to a minimum. He has not given a news conference in Spain in several weeks.

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