Spanish Prime Minister Mariano Rajoy admitted on Thursday he had handled the funding scandal badly but denied having taken illegal payments from his party's jailed former treasurer.

Rajoy said in his address to the country's parliament that his mistake was to have put blind faith in Luis Barcenas, trusting "someone whom we now know did not deserve it".

Rajoy and his ruling Popular Party (PP) stand accused of being illegally funded for around 20 years with himself and key party members accepting regular cash payments from an account kept by former party Treasurer Luis Barcenas, who is currently in preventive custody after he was discovered to have around 46 million euros hidden in a Swiss Bank account.

He attacked the opposition Socialist (PSOE) Party leader Alfredo Perez Rubalcaba of harming Spain's interests with the threat of a censure motion and of damaging the country's image to the outside world.

Rajoy insisted he will neither resign nor call new elections and with an ample majority in Congress he would win any no-confidence vote, if there is going to be one.

Rubalcaba repeated the accusations that the PP was basically corrupt, using the information published in the newspapers El Pais and El Mundo, who only recently interviewed Barcenas.

However, the PSOE leader was unable to offer anything other than what has been published in the press as a stick to beat Rajoy with and that helped Rajoy, who said that the case was for a judge to decide.

It emerged in January that Barcenas had hidden around 46 million euros in Swiss bank accounts. And Barcenas has told a judge he accepted millions of cash donations from construction firms, some of which he passed on to senior PP officials, including Rajoy, in the form of bonuses. Endi