By David Latona, Inti Landauro and Emma Pinedo

MADRID (Reuters) -Spanish Prime Minister Pedro Sanchez on Thursday resisted calls for a snap election, but promised an overhaul and external probe of his Socialist Party after a corruption inquiry forced a key lieutenant to resign.

A sombre-looking Sanchez apologised to Spaniards in a televised press conference and said he should "never have trusted" Santos Cerdan, a lawmaker and number three in the Socialist Party (PSOE) hierarchy. He vowed an "unwavering" response to any graft in the party.

"I have always worked for clean politics and a clean contest," he said. "It causes me enormous indignation and huge sadness that an entire political project in which millions of people trust could be affected by the conduct of a few."

But he ruled out calling elections before the end of his term in 2027, adding: "This isn't a crisis of government, it's only affecting the Socialist Party, not the government."

Cerdan resigned after a Spanish Supreme Court judge on Thursday invited him to testify over corruption allegations, which he denies, on June 25.

The case is the latest and most significant in a series of scandals surrounding Sanchez's fragile coalition government, including a high-profile probe into whether his wife Begona Gomez used her status to influence her business dealings.   

In a statement, Cerdan said he was resigning to dedicate his time to defending his innocence. "I've never committed any crime nor have I been complicit in one," he said. "I reiterate my innocence and trust that it will become clear after my testimony (in court)."

Sanchez took over as prime minister in 2018 following the biggest corruption investigation in Spain's democratic history netted scores of people linked to the then ruling People's Party, eventually leading to the ejection of then Prime Minister Mariano Rajoy in a no-confidence vote.

PUBLIC WORKS CONTRACTS    

Judge Leopoldo Puente said there was "strong evidence" of Cerdan's possible involvement in the "improper awarding" of public works contracts in exchange for a price, according to a court document seen by Reuters. Such acts constitute crimes of criminal organisation and bribery, which can carry prison sentences of as much as eight years.

In a report sent to the judge seen by Reuters, police provided transcripts of recordings of Cerdan discussing suspected kickbacks with former Transport Minister Jose Luis Abalos.

Cerdan "appeared to be the person in charge of taking those alleged payments," the police wrote in the report.

Earlier on Thursday, Cerdan said he had no recollection of the conversation.

   'RESIGN, RESIGN'

During a rowdy parliamentary session earlier on Thursday, opposition lawmakers had chanted "resign, resign" at Cerdan. 

Deputy Prime Minister Yolanda Diaz, from the PSOE's junior coalition partner Sumar, demanded "explanations and clarifications".

The judge also called for questioning Abalos and his former assistant Koldo Garcia, who was arrested last year on suspicion of taking payments to facilitate contracts for masks during the COVID pandemic.

Abalos, who last year refused to step down as a PSOE lawmaker following Garcia's arrest, has insisted he is innocent. Garcia has also said he was innocent and had been "crucified alive" by the media.

(Writing by Charlie Devereux; Editing by Aislinn Laing, Sharon Singleton and Alexandra Hudson)