HispanicBusiness

Spanish Premier Mariano Rajoy's unfolding corruption scandal overshadowed talks held Monday with German Chancellor Angela Merkel in Berlin on the euro debt crisis and the European Union's new budget.

Rajoy's ruling conservative People's Party (PP) announced plans to launch legal action against anyone spreading allegations about irregularities in its accounting, even as accusations swirled about past under-the-table payments to PP officials.

PP organizational Deputy Secretary General Carlos Floriano said the party had not yet decided whether the lawsuits would be filed in penal or administrative courts.

Floriano said they would concern "all" who had spread allegations, but did not say explicitly whether those to be sued included former party treasurer Luis Barcenas.

The daily El Pais sparked a scandal by publishing secret documents allegedly written by Barcenas.

The daily has not said how it got hold of the documents, which list Rajoy, PP Secretary General Dolores de Cospedal and a string of former PP leaders as having received under-the-table payments from companies.

Rajoy denied the report over the weekend. However, his credibility was undermined by the fact that he did not announce legal action against Barcenas. The Socialist opposition urged the premier to resign.

Barcenas, who was recently found out to have had 22 million euros (29.9 million dollars) in a Swiss bank account, has for years been under investigation in connection with the so-called Guertel network, which allegedly involved dozens of lower-level PP politicians and entrepreneuers.

Aware that Barcenas was a "time bomb," the PP had long allowed the former treasurer to enjoy privileges - an office at the party headquarters, secretary, car - for fear that he would reveal information harmful to the party, El Pais said.

Barcenas, however, denies the authenticity of the documents published by the daily.

The talks in Berlin between the German and Spanish leaders form part of the round of consultations by European leaders ahead of this week's summit on the EU's 2014 to 2020 budget.

On Thursday, Merkel held talks in Berlin with Italian Prime Minister Mario Monti. On Wednesday, she is set to meet French President Francois Hollande in Paris.