EMPLOYMENT-SPAIN: Tough Task Ahead In Europe’s Worst Jobs Blackspot

By Tito Drago Reprint | | Print |

Tito Drago

MADRID, May 7 1996 (IPS) - With more than 3.6 million out of a 15.7 million strong workforce without jobs in Spain — at 22.6 percent, Europe’s worst rate — the war on unemployment could hardly be anything else but top priority for the country’s new government.

New prime minister José Maria Aznar has charged new labour and welfare minister Javier Arenas, the youngest member of his cabinet, with kicking off a round of meetings between the executive branch and union and business leaders, starting next week.

Arenas says dialogue without preconditions will precede any change to the laws regulating the labour market, particularly its strict constraints on hiring and firing. Agreement will be “an essential first step to meet the government’s top objective of creating employment,” he told reporters here.

His party vowed during the election campaign to forge a German- style pact with trade unions and employers to encourage the creation of permanent jobs. But similar efforts to deregulate the labour market in an attempt to boost job creation have been met with stiff protests in Germany and elsewhere in Europe.

Spain also has to get its economy on the road to meeting the difficult preconditions of future European monetary union by cutting public spending and the national deficit — Aznar warned last week that all his policies were predicated on meeting a public deficit target of 4.4 percent this year and three percent next.

“Aznar has made it clear that he is determined to make sacrifices,” foreign minister Abel Matutes said in an interview with the daily El Pais. Expected cuts to be announced Friday could shave 1.4 billion dollars off this year’s state budget alone.

The EU’s executive Commission gives the current average April EU unemployment rate as 11 percent, compared to 22.6 in Spain, 12.4 percent in Italy and 11.6 percent in France. However Pedro Schwartz, chief economist at Madrid stockbroker Fincorp AV has estimated for the British daily Financial Times that the figures may not be bad as they look.

By counting the numbers of people in undeclared work and avoiding taxes, up to 1.3 million could be cut from the jobs total and the number in work increased accordingly. Thus the unemployment rate could be set at 15, not 22.6 percent, he said. Spain’s National Institute for Employment gives an adjusted figure of 16.2 percent — but whatever, it is still the highest in Europe.

The Spanish Confederation of Business Organisations described the government’s announced programme as “positive” — though the country’s two largest union federations, the pro-socialist General Workers Union (UGT) and pro-communist Workers’ Commissions (CCOO) have been more cautious.

CCOO spokesman Angel Campos warned that government proposals for privatisation and market liberalistion did not automatically square with the need to create stable jobs. He said the CCOO and UGT will present Aznar with a joint proposal on employment.

It would be based “on improvement of the productive fabric, the organisation of training and education, the reestablishment of labour stability and participation in the organisation of work.”

It will also include “a reduction of working hours, the development of new employment possibilities and the strengthening of the official organs in charge of boosting a public employment service.”

Aznar’s predecessor Felipe Gonzales tried to relax the rigid Spanish labour market with partial reforms from 1994, allowing an increase in temporary employment and cuts in the cost of shedding labour where unavoidable — most dismissals still cost employers 45 days’ pay for each year worked. He also eased rules controlling the change of workers’ job descriptions.

But Gonzales, on election in 1982 vowed to create 800,000 new jobs only to see recorded unemployment rise by a million. Now Aznar and Arenas now have the task of facing up to the unions to push through more reforms, who suspect their true purpose puts budget cuts and big business before job creation and workers’ rights.

Throughout the election campaign Aznar warded off such accusations by emphasised his party’s commitment to pension levels, national health services and unemployment benefits. He blamed Spain’s budget deficit on debt costs, not the welfare system.

Under the his manifesto, revenues from privatisation would go to reducing government debt, and losses from promised tax cuts would be accompanied by a crack down on what Aznar calls Spain’s “scandalous” number of tax evaders.

Aznar’s task is complicated by his lack of a overall majority. His conservative People’s Party won 156 seats on Mar. 3 against Gonzalez’s Socialists, who took 141 seats, leaving Aznar 20 seats short. It has forced him into a pact with parties from Catalonia, Basque country, the Canary Islands and wily Catalan regional chief Jordi Pujol, who has proved a tough and unforgiving political player in recent years.

The Spanish jobs market is historically influenced by foreign factors. Major job losses in Spain’s energy intensive industries followed oil price crises between 1975 and 1985, dramatically reversed by Spain’s entry into the European Common Market, as it then was, and the massive influx of foreign investment it started.

In 1992-93 the job market crashed again as the bill for European Union membership arrived in the shape of strong commercial competition from its partners and an overvalued currency within the EU’s European Monetary System, prelude to future monetary union.

Aware of the need for a controlled approach to the European market without jeopardising Spain’s chances of joining the proposed European single currency, Aznar says the primary aim is to see the public deficit come down and revenues increased.

He has a good start. Spanish growth is back to about three percent a year and inflation is down to four percent. And in 13 years of rule Gonzales’ lasting gift to Spain was a secure democratic political environment that makes the likelihood of violent resistance to deep economic reform less likely than in some EU countries.