This article deals with the problem of the increasing distrust in institutions in European democracies, paying special attention to countries such as Spain and Portugal, which are being severely harmed by the current economic crisis and the austerity measures imposed by supranational organizations such as the European Union and implemented by their respective national governments. Contrary to the purely political-economic paradigm, the present article, based on panel survey data gathered during the years 2011 and 2012 in Spain and Portugal, shows that this deterioration is due principally to the negative perception of the political responsiveness of representative institutions and aggravated by the increasing perception of political corruption. Multilevel governance and the present economic crisis are challenging representative institutions, but their functioning and elite misbehavior during the crisis are the main explanations of increasing citizen distrust in such institutions.