MADRID, Dec 13 (Reuters) - Spain's government proposed a law on Friday to control more tightly the financial activities of political parties, after corruption scandals in recent years involving both left and right.
The law will ban legal and corporate entities from making donations to parties, and banks will no longer be allowed to cancel their debts or negotiate with them interest rates that would be below market levels.
Donations are currently allowed up to a limit of 100,000 euros a year.
"All illegal donations will have to be paid back," said Deputy Prime Minister Soraya Saenz de Santamaria at a news conference following the weekly cabinet meeting.
The country's two main parties, the governing People's Party (PP) and their Socialist predecessors, have both been involved in graft cases in recent years.
The former treasurer of the PP told a judge that he had channelled cash donations from construction magnates into leaders' pockets, and he was found to have 48 million euros in Swiss bank accounts.
The new law comes about 10 months after it was first announced by Prime Minister Mariano Rajoy, who has also been alleged by the treasurer to have taken illegal cash payments. Rajoy has denied any wrongdoing.
The new law, which still has to go to parliament and could receive amendments, also establishes tighter control of senior officials in the state administration by obliging them to file a declaration listing their assets and their wealth.
Spain has slumped 10 places to a rank of 40 in a global index of perceived official corruption after a spate of scandals involving its political parties and the royal family, watchdog Transparency International said earlier this month. (Reporting by Julien Toyer; Editing by Catherine Evans)