Spanish Prime Minister Mariano Rajoy has strongly denied corruption allegations and pledged Spain would see off its worst financial crisis in recent years.

He said his Popular Party was committed to reforms that would steer Spain away from economic problems and rejected opposition calls for his resignation after a newspaper published images of documents allegedly showing secret payments to PP members.

Mr Rajoy said the claims were "totally false" and denied receiving illegal money. Speaking alongside German Chancellor Angela Merkel in Berlin, Mr Rajoy said his government remained strong and would overcome the accusations, which have sparked protests and an online petition for his resignation signed by 74,000 people.

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He said: "The government is stable. The PP has a majority. It's carrying out its agenda based on reforms."

Mrs Merkel said Germany would support the Spanish Government's efforts, adding: "I have the impression the whole Spanish Government is working to drive down unemployment, to push through structural reforms."

However, Spain's IBEX share index dropped 3.9% yesterday amid worries about the corruption scandal and its potential implications.

Spain's chief prosecutor has said there could be enough evidence to investigate the allegations but the PP has said it will take legal action against those responsible for what it says is a smear campaign, while announcing an internal audit of its finances.

The leader of Spain's main opposition party, Alfredo Perez Rubalcaba, has also called for the Prime Minister to resign.