Welcome to June

As Streetwise went to press, Spain’s government decided to give tripartite talks with the unions and business representatives another five days until the end of May, in the hope of securing an agreement on the long-awaited reforms to the structure of the labour market.
With Europe’s highest unemployment figure (20% from a figure of 7% in 2007), Zapatero needs a deal. The two largest unions, Comisiones Obreras (CCOO) and the Union General de Trabajadores (UGT), met the business association CEOE last month to thrash out how to overhaul a system criticised as uncompetitive and unproductive.
The government has warned if an agreement cannot be reached between the unions and business representatives, it will act unilaterally.
Unilateral reform would concentrate on systemic adjustments which have been repeatedly called for by economists and investors, including the International Monetary Fund last month.
“The reform will need to be ambitious and comprehensive if it is to significantly change labour market dynamics and to avoid missing an historic opportunity,” the IMF said.
The government would concentrate on granting greater flexibility in the hiring and firing process to reduce the gulf between the temporary and permanent contract holders.
Around 90 percent of layoffs since the beginning of the crisis have been holders of temporary contracts. With young people the most likely to be offered this kind of work, over 40 percent of under 25s are out of work in Spain.
Collective wage bargaining would also be overturned to improve competitiveness of Spanish workers and hang wage rise accords on productivity rather than inflation.
With Spain’s budget deficit one of the largest in Europe in relative terms at 11.2 percent of gross domestic product in 2009, the government would not consider cutting business payments to the welfare system.
While a reform of this kind might be the most effective, the government does not wish to act alone and, with popular support around 9 percentage points lower than the opposition’s, it will not risk upsetting the electorate. The current Socialist government is also not inclined to confront the unions, which would almost certainly force them to call a general strike.
The CCOO and the UGT have called marches by civil servants for June aimed at protesting austerity plans that will cut public sector wages by an average of 5 percent this year and next. They have also said a general strike could be on the cards without going so far as calling for one.
The Socialists do not hold an absolute majority in parliament and since the main opposition will certainly vote against the reform, the government will need small parties to back them to turn the changes into law.
Without a consensus, Zapatero’s government would struggle to find political parties willing to take such a risk.
Let’s hope that by the time Streetwise is in your hands, the various parties above have seen sense, and a way forward is agreed, for all our sakes!

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