By Elisabeth O'Leary
MADRID (Reuters) - Spain's embattled royal family has agreed to open its affairs to more public scrutiny under a new transparency law intended to restore confidence in a political establishment undermined by corruption and a deep economic crisis.
Two days after King Juan Carlos's daughter was charged in an embezzlement case, a palace source told Reuters that the royal household had, after two months of negotiation with ministers, accepted that it should be subject to the new freedom-of-information legislation, along with other organs of the state.
The move reflects the royal family's concern about retaining its influence in its largely figurehead role as scandals erode its popularity among Spaniards stricken with economic malaise.
The 75-year-old king, born in exile but recalled to succeed the dictator Francisco Franco as head of state in the 1970s, once enjoyed huge popularity as a constitutional monarch, not least after he helped quash a military coup in 1981.
But talk of his extravagance - notably when he took off on an elephant hunt in Africa last year as the government pleaded for indulgence from international creditors - as well as the case against his daughter and son-in-law have strengthened calls for his abdication in favor of his son. For the time being, few Spaniards want a return to a republican constitution.
Prime Minister Mariano Rajoy, whose center-right People's Party is also embroiled in a number of corruption scandals, has sent to parliament a bill for a new transparency law that would give the public a right of access to official documents.
It is currently being debated.
New rules could give the public more right to monitor how much the government grants to the royal family for its official functions. Unlike, say, the British queen who has vast personal wealth accumulated over the centuries, Spain's Bourbon royals lost much of their property when forced to flee in 1931.
The constitution establishes an annual allowance for the royal household, which employees some 500 people. Last year the allowance was 8.26 million euros, down 7 percent since 2010.
Out of the larger stipend, the king in 2011 reported pre-tax personal earnings of some 300,000 euros while the crown prince had around 150,000. Queen Sofia and her two daughters had expense accounts of some 375,000 euros in 2011.
On Wednesday, an examining magistrate charged Juan Carlos's younger daughter, Princess Cristina, with aiding and abetting her husband, a former athlete who is charged with a number of crimes in a 6-million euro corruption case.
The transparency bill, and other new rules put forward by Rajoy, propose tighter regulation of tax declarations, assets and activities of public employees, rules for lobbying activities, harsher punishments for corruption, and more thorough audits of foundations, labor unions and business chambers that receive public funding.
A high-level official on the prime minister's staff had previously told Reuters that the government was waiting for word from the royal family on whether or not it would agree to be subject to the proposed new rules.
The official said the transparency law could have gone forward without including the royals - a European convention on information-access rules says that reigning monarchs and their families be excluded from such legislation.
Under the proposed law, funds that government ministries provide to the royal family for specific public services would already have come under greater scrutiny even if the palace had not opted in.
However, opposition parties in Spain had been pushing to include the monarchy in the transparency law so that it would be treated as any other public institution and so that a wider, discretionary budget it receives in addition to the annual allowance could get more scrutiny.
Domestic critics of current arrangements note that Spain is the only country in Europe, besides Belarus, which does not have a freedom-of-information, or transparency, law.
The new law is meant to provide channels for citizens to request to see official documents. Such laws usually establish limitations for information on security or sensitive issues.
LONG-RUNNING CORRUPTION PROBE
The popularity of the royals started to decline markedly in 2011 when an examining magistrate formally opened a probe into a non-profit foundation run by the king's son-in-law, Princess Cristina's husband Inaki Urdangarin.
In his pre-trial investigation, the magistrate has found evidence that Urdangarin used his royal connections to get contracts to put on sports events, then overcharged for the services and hid the money.
The Urdangarin case developed just as Spain's economic crisis worsened, sharpening the burden of huge debts, crippling unemployment levels and widely felt government cutbacks.
Under pressure to prove it was not above public scrutiny, in 2011 the royal family began to publish details on its budget and allowances for the first time.
The royal image worsened however last year when the king broke his hip on an African hunting safari, and pictures published of him standing in front of an elephant with a gun from a previous such trip, caused a furor.
The king made an unprecedented apology for the incident.
Transparency activists say the incident proved the need for more information on the activities of the king and demanded to know more about who pays for his travel and which foreign business leaders he meets.
(Additional reporting by Fiona Ortiz; Editing by Angus MacSwan and Alastair Macdonald)