Corruption in Spain is on the increase, and the real estate sector is largely to blame, says the latest report from Transparency International (TI), the Berlin-based NGO that tracks corruption levels in 178 countries.

This conclusion contrasts with the Jones Lang LaSalle report on transparency levels in real estate markets worldwide, reported here last week, which found that transparency in the Spanish property sector has been improving.

TI’s 2008 report excoriates Spain for numerous corruption scandals and property abuses that have undermined the public’s faith in state institutions, and lead to the widespread belief that all politicians and business people are crooks.

“Municipal corruption is a big worry, and in 70% of the cases where town halls have been implicated in corruption scandals the mayor has been re-elected, sometimes with a bigger majority,” a representative of TI in Spain told the Spanish press.

Despite a certain amount of public tolerance of corruption, there is a growing belief amongst Spaniards that corruption is on the increase, and spreading in government and business. 60% believe that the government does nothing or very little to stop corruption in the property sector, and 10% believe that the government actively encourages it. 63% believe that political parties are corrupt, 41% believe that lawmakers are corrupt, 54% that companies are corrupt, and 44% that the media is corrupt.

Turning to public services, the same pattern emerges. 40% consider the judiciary corrupt, 29% the police, and 37% the tax authorities.

“The outlook is depressing,” says the TI report, which points out that corruption destroys social capital and breaks down society’s bonds of trust. Just 30% of Spaniards believe they can trusts their fellow citizens, reveals the report.

TI also remark on the damage done to Spain’s economy and environment by the late property boom. Construction booms “divert resources from productive to unproductive sectors,” says TI, whilst pointing out that Spain’s property sector might generate 32% of town hall incomes, but it also accounts for 36% of municipal expenses.

Spain’s construction boom has also wreaked destruction on the environment, especially in coastal areas, and pushed up the price of housing, both of which break down the pact between generations, argues TI.