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MADRID (Reuters) - When a corruption scandal hit Spain's ruling party earlier this year, attention turned to the Accounts Tribunal, an obscure body that audits public spending.
Surely this independent institution, with an annual budget of $78 million and 800 workers, could shed light on allegations in the media that a former treasurer for the People's Party had run a slush fund from party headquarters.
It soon emerged, however, that the watchdog lacked teeth.
The Accounts Tribunal, akin to an Auditor General's Office, had a five-year backlog in auditing party books, so far behind that if it did unearth wrongdoing, it would be too late to refer potential crimes to the justice system for prosecution.
The Tribunal's president pledged to improve efficiency. But employees have sued the board of directors - 12 people appointed by parliament - over what they claim are politicized hiring techniques that undermine independence.
The scandal over the Accounts Tribunal, frustration over delays of up to 14 years in prosecuting corruption, and a spate of high-level graft cases have heightened awareness in Spain over how weak its institutions are.
During a long economic boom that crashed in 2008, Spain prospered despite inefficiency. But now graft is holding it back as it struggles to emerge from a five-year economic crisis that has wiped out millions of jobs.
Street protests are mounting as voters fight budget cuts and tax hikes that are increasingly seen as unfair.
Meanwhile judges are looking into millions of euros in Swiss bank accounts belonging to the former PP treasurer, who has been charged with bribery and other crimes in a probe that predates the slush-fund allegations.
In the latest development to outrage the public, Princess Cristina, the king of Spain's daughter, was charged on Wednesday with aiding and abetting her husband who faces multiple criminal charges in a $7.7 million embezzlement case.
The unprecedented judicial move against the once untouchable royal family may be a sign that the courts are getting tougher on corruption. But government officials, corruption experts and transparency activists say there is still much to do.
Spain has no law regulating lobbying, for example. Most developed countries do. Spain is the only European country besides Belarus that does not have a basic transparency law, or freedom of information act, although such legislation does not always provide as much information as people might like.
Party financing remains opaque despite some partial reforms. The Council of Europe and corruption monitor Transparency International have repeatedly recommended Spain beef up the Accounts Tribunal to properly monitor party accounts.
"When investors look for somewhere to put their capital they look at a country's institutional quality. Spain lacks two of the most common benchmarks: a transparency law and a budget oversight body," said John Muller, an economic editor at El Mundo newspaper.
The potential consequences of what Muller calls an "institutional deficit" are a deteriorating business investment climate, or even an Italian-style breakdown in government as political fragmentation grows.
"Since the beginning of the economic crisis, public confidence in the parliament, in local government, in all public administrations, has fallen," said Jose Pablo Ferrandiz, vice president of the Metroscopia polling company.
"Trust in institutions has dropped to worrying levels, not alarming levels, but worrying levels," he said, noting that voters are increasingly turning away from the two main political parties.
Corruption has moved into the No. 2 spot in a quarterly poll of Spaniards' biggest concerns, right after unemployment which is an alarming 26 percent.
In another sign of public impatience, complaints to the independent People's Ombudsman's office - regarding everything from banks to government - soared by 36 percent last year.
"Inefficiency and corruption fuel indignation," said a 2012 Transparency International report on growing protest movements in Greece, Italy, Portugal and Spain.
Spain ranks 30th in Transparency International's annual index of perceptions of corruption. Only Portugal and Italy rank lower in Western Europe.
Besides growing voter disapproval, Prime Minister Mariano Rajoy also faces pressure from European partners who are demanding more accountability in exchange for a $52.7 billion bailout of sick Spanish banks.
Rajoy has announced he will set up a new budget oversight body to better control public spending, on orders from Brussels.
Rajoy, whose credibility was hammered when the scandal broke over his party's former treasurer, pledged to present a transparency bill during his first 100 days in office, which he did. The bill is currently being debated in Parliament.
"We'll have one of the strongest transparency and anti-corruption laws in the world," said Jose Luis Ayllon, the government's Secretary of State for Parliamentary Relations and one of the architects of the bill.
Ayllon said the new law, as well as other resolutions in Parliament, would speed up justice in corruption cases, increase sanctions, regulate lobbies, and force political parties, labor unions and other bodies to respond to information requests from the public.
But critics say the new rules are still too narrow.
Mar Cabra, an investigative journalist and activist on transparency issues, said the royal family should be covered by the proposed new transparency rules, but is not.
She notes that the king, who is head of state, has no obligation to report, for example, meetings with foreign business leaders or who pays for his trips abroad.
She said Spain has to build an entire culture around transparency because people here don't know they should have a right to ask for information.
"Accountability. We don't even have a word for it in Spanish," she said.
"In the United States you can find out who paid for each political ad, just by pointing a mobile phone app at the television," said Cabra. "In Spain, that is science fiction."
Editing by Giles Elgood