Rajoy said on Saturday that he would not resign, labeling newspaper reports of irregular financing within his center-right party as "harassment."

"Never, I repeat, never have I received or distributed undeclared money in this party or anywhere else," said Rajoy. "We must not allow Spaniards, of whom we are demanding sacrifice, to think that we do not observe the strictest ethical rigor."

The prime minister promised that he would publish details of all funds in his personal bank account on his office website. "Next week, my statements of income and assets will be made available to all citizens," he said.

Detail of papers belonging to former People's Party (PP) treasurer Luis Barcenas were published by the Spanish daily newspaper El Pais on Thursday, allegedly showing that under-the table payments had been made. The left-leaning newspaper reported that a secret slush fund - mostly paid for by the construction industry and hidden from tax officials - had been used to channel money to both the party and high-ranking members.

Grounds for investigation

The individuals said to have benefited from the so-called Guertel network included Rajoy, the party's Secretary General Maria Dolores and former leaders of the PP. El Pais said nearly two-thirds of the payments breached Spanish law on party financing.

Spain's Attorney General Eduardo Torres-Dulce on Friday said there were sufficient grounds for an investigation.

The allegations have stoked discontent among a section of the public amid tough austerity measures. Protesters vented their anger outside the PP offices in Madrid on Saturday, with dozens of police in riot gear guarding the headquarters.

An online petition calling for Rajoy to resign had garnered nearly 650,000 signatures by Saturday afternoon, two days after being launched.

rc/dr (AP, AFP, Reuters)