AN AGREEMENT on Tuesday between Spain’s government, unions and employers aimed at boosting jobs, capping a similar deal last week to raise the retirement age from 65 to 67, is most timely good news for newly energised prime minister Jose Luis Zapatero. Today he joins EU leaders at a summit, ostensibly about energy security, but likely to be dominated by discussion of the financial crisis, bailouts and economic governance.
He will be able to insist, now with some renewed justification, that Spain should not be seen as a candidate for rescue, but that, as he put it on Wednesday, it is “strong . . . solvent . . . and implementing its reforms”. Yields on Spanish, Portuguese, Italian and Belgian 10-year bonds have all fallen this week reflecting a degree of increased market confidence.
Spain’s economy, the euro zone’s fourth largest, crawled out of recession at the beginning of last year but has since stagnated, faced with a collapsed construction sector. Its exports have been holding it up although unemployment has risen to an EU high of 20 per cent. The government has pushed through billions of euro in deeply unpopular spending cuts to lower its deficit to 6 per cent of gross domestic product this year from 11.1 per cent in 2009.
The deal on the phased rise in the age of retirement to the oldest in the EU was strenuously resisted initially by the unions who threatened a general strike. But it is crucial and no mean achievement. The number of Spaniards over the age of 64 is set to double over the coming four decades, reaching about 32 per cent of the total population, with crippling consequences for state spending. The issue has caused huge protests elsewhere in the EU, not least in France, which only raised the minimum retirement age to 62, and in Greece which saw riots on the streets.
Tuesday’s agreement on a “grand social pact” involves job programmes, talks to boost research and innovation as well as on reforming the energy and manufacturing sector, the extension of payments to the long-term unemployed and sharp cuts in social insurance payments by employers, particularly small firms. Next the government promises to reform the cumbersome system of collective bargaining, if necessary by unilateral dikat. It will also take on the 150,000-strong tax-evading black economy. Last week economy minister Elena Salgado also announced new capitalisation requirements for heavily-indebted savings banks.
The message? Manana days no more!