Rajoy ploughs on in spite of scandal When Mariano Rajoy gives his annual state of the nation speech to parliament on Wednesday, he will face a challenge as steep as the banks of wooden seats that rise in the Palacio de las Cortes in front of him. Spain's prime minister will try to convince his audience that the state of the nation is, if not good, then at the very least improving. He will point to the reduction in the budget deficit, the banking system clean-up, rising exports and the gradual return of investor confidence in Spain. And he will repeat the assurance that he has given many times in recent weeks: that the Spanish economy will finally start growing again, and creating jobs again, towards the end of this year. Away from the government benches, however, Mr Rajoy's words will fail to resonate. That is because Spain's leader will be talking with not one, but two leaden political weights hanging around his neck: the first is the dire economic reality on the ground, where more than one in four Spaniards is unemployed and where credit-starved companies continue to shed labour at an alarming rate. The second is, of course, the slush fund scandal that has engulfed the ruling Popular party and Mr Rajoy himself. The allegations against the PP and the prime minister are as yet unproven, but the political damage is already immense. According to reports in the Spanish press, the party operated a secret fund for more than a decade from which its treasurer made payments to senior party leaders, including Mr Rajoy. He and other PP leaders have denied the reports, but they follow a series of similar cases and allegations. Many Spaniards see themselves confronted with a political corruption pandemic that has shaken their belief not just in the country's politicians but its institutions as well. Whatever the truth of the latest allegations, the scandal has laid bare some of the key political deficiencies that plague the Spanish leader. It took Mr Rajoy two days to respond to the claims, and when he did he refused to answer any direct questions from journalists. The PP struck down an attempt to launch an independent parliamentary inquiry into the affair, and instead sought to turn the fire on the media and the opposition Socialists (with some success). Mr Rajoy has also refused to demand - let alone enforce - personal consequences: despite the constant drumbeat of revelations in the media, no senior party official or minister has been asked to leave their post. The prime minister has even been reluctant to offer public condemnation of Luis Bárcenas, the former party treasurer at the heart of the scandal. It is this appearance of political impunity, perhaps more than anything else, that infuriates Spaniards. They have heard plenty of denials, but few explanations and no apologies. They have seen their prime minister and his party circling the wagons. But they have yet to see a leader capable of transcending Spain's bitter partisan divide, grasping the magnitude of the crisis engulfing the country's political class, and charting a way out of it. At the same time, the slush fund affair has also served as a reminder of Mr Rajoy's core strength: his ability to shut out the political controversy of the day, ignore the devastating polling data, and simply plough on. Aides say that the turmoil of the past weeks has had little discernible impact on the prime minister, and insist that the government's political agenda will not be derailed by the latest accusations. Fears that the vertiginous drop in popular support for the government will weaken its resolve to push through austerity measures and further structural reforms are, so the Rajoy camp claims, entirely misplaced. Mr Rajoy and his advisers believe they have until 2015 to turn the Spanish economy around. If they fail to deliver on that goal, the PP will almost certainly be booted out of office no matter what else happens. If they succeed, however, the slush fund scandal may become a secondary consideration for voters - yet another murky tale of political corruption, lost in the slow-growing thicket of Spanish justice. That, in any case, appears to be the political calculation underpinning the government's response to the Bárcenas affair. Fix the economy, ignore the scandal, and sooner or later the state of the nation will fix itself.