Madrid sues over `dirty war' claims

The Spanish Justice Ministry said yesterday it was suing for slander two former policemen and a left-wing MP who this week accused the government of being behind paramilitary death squads who fought a "dirty war" against Eta Basque separatists in the Eighties.

The action follows a highly-charged television appearance on Monday night by the Prime Minister, Felipe Gonzalez, who strenuously denied any government involvement in activities of the GAL anti-terrorist group.

There was little sign yesterday that Mr Gonzalez's unusual step had done anything to calm either mounting political tensions or financial jitters in Spain. The leader of the main conservative opposition Popular Party, Jose Maria Aznar, dismissed Mr Gonzalez's performance as "pathetic and unconvincing" and insisted that the Socialist government call early elections to resolve an "unsustainable political situation."

Mr Gonzalez said in his televised interview that he had never organised, authorised, justified or tolerated the actions of the GAL, which had led to the deaths of some 26 Eta suspects. "Whoever imputes to the government any responsibility is lying, falsifying reality," he said. He promised legal action against the two former policemen, Jose Amedo and Michel Dominguez, who had made the allegations.

On Monday, the two men, released last year after serving eight years of their 108-year jail term for having been involved in six assassination attempts by the GAL, stated that they had received 200m pesetas (£960,000) from an Interior Ministry slush fundintended to keep them quiet about who controlled the GAL. The money, they told El Mundo newspaper, was funnelled to Swiss bank accounts in their wives' names.

Yesterday the judge who has reopened investigation into the murky affair, Baltasar Garzon, flew to Switzerland to investigate the alleged Swiss accounts. Judge Garzon on Monday ordered the detention of Juan de Justo, the right-hand-man of the former secretary of state for security, Rafael Vera, on suspicion of fraudulently transferring public funds to Switzerland.

Mr Vera is resisting pressure to take responsibility for the actions of his subordinate, and yesterday accused Judge Garzon of using torture and coercion in his interrogation of Mr Justo.

The third man being sued by the government, the United Left MP Felipe Alcaraz, has gone so far as to accuse Mr Gonzalez of being at the top of the GAL's authority structure, the so-called Mr X - an opinion endorsed yesterday by the party's leader, Julio Anguita. "Mr Gonzalez was politically and effectively Mr X," Mr Anguita said yesterday.

Besieged from both right and left, Mr Gonzalez continues for the moment to enjoy the support of his coalition partners, the conservative Catalan Convergence and Union party. Their leader, Jordi Pujol, said yesterday they would continue to back the rulingSocialists' political and economic policy. Should that support waver, the government could fall.

The crisis has sent shudders through Spain's financial world, pushing the peseta down to its lowest level against the German mark for five years. Yesterday the peseta rallied somewhat, following intervention by the Spanish national bank and some German banks. The minister of the economy, Pedro Solbes, trying to reassure international investors, said there was no economic reason for the fall and promised a swift recovery.