Rato released from police detention

Rodrigo Rato, the former head of the International Monetary Fund, was released from police detention in the early hours of Friday morning, after emerging as the target of a headline-grabbing probe into possible tax fraud.

Mr Rato was detained for seven hours while both his home and office were searched by tax investigators. In a statement to Spanish media after his release, Mr Rato said: "I am home and I am free." He added that he was co-operating with the authorities and that he had "full confidence" in the Spanish justice system.

His detention late on Thursday sent shockwaves through Spain's political and media landscape. Television footage showed Mr Rato emerging from a block of flats in an upscale Madrid neighbourhood, accompanied by several law-enforcement officers, who drove him away in a police car. According to Spanish media reports, prosecutors and tax inspectors are investigating the former IMF chief for alleged tax fraud, money laundering and asset stripping. He has not been formally charged.

Mr Rato's detention makes him the highest-profile target yet in a series of legal probes against top Spanish bankers and politicians, and comes as a fresh blow to the country's already discredited political class.

Before taking up his post at the IMF, Mr Rato was a senior leader of Spain's centre-right Popular party, serving as both finance minister and deputy prime minister in the government of Jose Maria Aznar. While the current PP leadership around Mariano Rajoy, Spain's prime minister, has sought to distance itself from Mr Rato, the latest scandal is likely to inflict further damage on the party just six weeks before a series of regional and local elections.

Mr Rajoy also faces a general election later this year.

Earlier on Thursday, Spain's justice minister confirmed that the country's tax authorities were investigating Mr Rato. Rafael Catala told the Efe news agency that the case was linked to Mr Rato's decision to repatriate foreign assets to Spain as part of a government tax amnesty offer in 2012. "What is being investigated by the anti-money laundering authority is whether the source of those repatriated earnings was legal or illegal," he said.

In comments made to the El Pais daily before his detention, Mr Rato said on Thursday: "This is a personal issue and I have no obligation to make any declarations about this subject."

The probe into Mr Rato's tax affairs is one of several investigations directed at the former IMF head. He is also under legal scrutiny for his role in the ill-fated flotation of Bankia, and for a separate scandal involving the use of off-the-books corporate credit cards for senior Bankia personnel and directors.

Mr Rato was appointed chairman of Caja Madrid, one of Spain's largest regional savings banks, only months after he gave up his post at the IMF in 2007. Caja Madrid merged with other savings banks to create Bankia, a sprawling financial group that emerged as the symbol of Spain's 2012 financial crisis. Teetering on the brink of collapse, Bankia was eventually rescued by the government thanks to a €22bn bailout, but Mr Rato and other senior managers left in disgrace.

He has been the target of particular vitriol from hundreds of thousands of small shareholders in Bankia, who saw the value of their holdings wiped out almost entirely as a result of the bailout.

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