* Graft scandals deepen public's anger over spending cuts
* Former People's Party treasurer in closed-door hearing
* Revelations about Barcenas severance pay embarrass Rajoy
* Barcenas charged with bribery, money laundering, tax fraud
By Julien Toyer
MADRID, Feb 25 (Reuters) - The former treasurer of Spain's ruling party, at the heart of a corruption scandal that has politically damaged Prime Minister Mariano Rajoy, appeared in court for questioning on Monday about millions of euros he deposited in Swiss accounts.
Luis Barcenas is accused of using his position to take bribes, evade taxes by hiding the proceeds in Switzerland and launder money through shell companies, charges that carry prison sentences of up to six years and fines.
The long-running High Court investigation of Barcenas and a graft case involving the son-in-law of Spain's king have enraged Spaniards at a time when deep recession has pushed unemployment to 26 percent and the government has slashed public spending.
In a ruling released after the three-hour hearing, held behind closed doors, Ruz decided to put Barcenas on probation but took steps to restrict his movements because he considered there was "a serious risk" he could fly away from the country to avoid a condemnation.
Ruz banned Barcenas from leaving Spain, seized his passport and imposed on him an obligation to appear before the court twice a month.
Barcenas, 55, an avid mountaineer who once scaled Everest, went skiing in Canada two weeks ago, according to media reports. Some of these reports said the police suspected he also used the ski trip to move funds he holds there.
Barcenas's lawyer declined to comment on those reports.
The judge also confirmed he was seeking additional information on accounts and companies related to Barcenas in Switzerland, Argentina and the United States.
In Spain's legal system, lengthy pre-trial investigations are carried out by examining magistrates such as Ruz. A trial could still be months or years away for Barcenas.
TROUBLE AT THE TOP
Barcenas left the centre-right People's Party (PP) in 2009 after he was charged with taking money from companies that overcharged PP mayors to put on events, such as campaign rallies, then shared the extra profit with the politicians.
Public interest in the case had largely disappeared until January, when Ruz's probe revealed that Barcenas had Swiss bank accounts once worth as much as 22 million euros ($30 million).
The High Court judge also found that Barcenas applied last year for a tax amnesty, instigated by Rajoy to try to boost revenue, to bring millions of euros in off-shore investments back to Spain.
Then, El Pais newspaper published extracts from what it said were secret PP account books that Barcenas kept for almost 20 years, showing cash donations from construction magnates that were distributed to Rajoy and other party leaders.
Barcenas has denied any wrongdoing and says the purported ledgers are forgeries.
However, a police report that is part of Ruz's evidence and that was seen by Reuters, showed that in December Barcenas made a notarised statement saying he had records of years of donations made to the party as well as who got the proceeds.
Barcenas says the money in the Swiss accounts is from legitimate business activities, but Ruz's investigation has cast doubt on that defence, according to court documents which have been seen by Reuters.
Rajoy has denied any wrongdoing, either personal or by the party. He has pledged an external audit of PP accounts and put years of his own personal tax declarations on the official website of the office of the prime minister.
SOURED PUBLIC MOOD
The Barcenas scandal has soured a public mood already bitter over joblessness, cuts to education, health spending and public sector wages, and the 40 billion euros in public funds spent on rescuing failed banks and grim joblessness.
Tens of thousands of homeowners have defaulted on their mortgages and been evicted from their homes.
A small group of protesters joined dozens of reporters in front of the court building in central Madrid after Barcenas entered for the closed-door hearing.
"They are lying to us, and worse than that, scorning us... Enough is enough, we need some accountability," said Ana, 59, a civil servant from Madrid who declined to give her last name.
The fact that Barcenas continued to receive monthly instalments on his severance package from the PP years after being charged with crimes related to party duties has embarrassed Rajoy and fuelled speculation that the former party treasurer holds incriminating information about party leaders.
"The party has nothing to fear," PP Secretary General Maria Dolores de Cospedal said at a news conference on Monday when asked whether Barcenas was blackmailing the party.
Opinion polls show declining support for Spain's two main parties, the PP and the Socialists, who have had their own corruption scandals, with more and more people turning to smaller parties, signalling greater political fragmentation to come.
Rajoy has resisted calls to step down himself as well as calls to dismiss Health Minister Ana Mato, whose ex-husband has been accused of taking hundreds of thousands of euros in bribes from the same group of companies that Barcenas was involved with.
The PP has an absolute majority in Congress and, as long as the party leadership sticks together, the prime minister is expected to survive politically.