Spanish Parliament to vote on labor market reforms; Obama rings Zapatero to express support
By APTuesday, June 22, 2010
Spanish Parliament votes on labor reforms
MADRID — Spanish lawmakers were expected Tuesday to approve labor market reforms the government says are crucial to bringing down a 20 percent jobless rate and restoring confidence among investors fretting over the prospect of another Greek-style debt crisis.
But some economists and even Spain’s central bank governor are questioning whether the changes will deliver the more than 2 million jobs that Prime Minister Jose Luis Rodriguez Zapatero’s Socialist government predicts the reforms will create over the next two years.
The reforms, which ease hiring and firing regulations, were to be voted on in a late afternoon session of Parliament.
Spain’s main opposition party, the center-right Popular Party, hinted it will abstain. That and expected abstentions from other, smaller parties would allow the ruling Socialists to get the measures through by a simple majority, which is all they need.
The package follows an austerity plan aimed at slashing a bloated deficit of 11.2 percent of GDP in 2009 to 3 percent by 2013 that lawmakers approved by just one vote last month.
The Socialists have 169 deputies in the 350-seat lower chamber but have seen the support they normally receive from smaller centrist and leftist parties disappear in recent months amid furious criticism of Zapatero’s handling of the country’s economic woes.
The labor reforms have been in effect since the Cabinet approved them last week. If they are approved by Parliament, the reforms would then be opened up to more thorough debate and possible amendments the coming months, although Labor Minister Celestino Corbacho insists they will not be watered down.
Chiefly, the reforms cut severance payments for new jobs from a current 45 days per year worked to 33. The government hopes other changes will encourage companies to move away from temporary contracts, which now represent more than a quarter of all contracts in Spain, by making it more expensive for companies to use them
The measures, while sharply criticized as insufficient or counterproductive at home, have been welcomed by the U.S. government, the International Monetary Fund and the European Union.
The White House said President Barack Obama talked by telephone with Zapatero on Monday to express his support.
The reforms also are aimed at calming fears among market investors that Spain — which has seen its deficit soar with spending to cope with unemployment and a drop in tax revenue — might be headed for a Greek-style bailout.
But some are not convinced the reforms will actually prompt companies to hire en masse, which is what Spain needs desperately to resurrect an economy that only just crawled out of nearly two years of recession.
Bank of Spain governor Miguel Fernandez Ordonez welcomed the changes as a good first step but said they do not go far enough. He told a parliamentary commission Tuesday that the package does not modify a collective bargaining system he described as cumbersome for companies, and said phasing out temporary contracts should not be done until businesses start embracing the new open-ended ones.
“We have to keep all job creation opportunities open,” he said.
Sandalio Gomez, professor of management at IESE Business School in Madrid, said the fact that the reforms now face a period of debate and likely change in Parliament does not instill confidence for business leaders or investors.
“This does not provide security to anyone. This transmits doubts,” he told the AP.
He said the government is trying to conceal that it is making it easier and cheaper to lay off workers — something it had repeatedly said it would not do. Critics say Zapatero is beholden to Spain’s labor unions — and failed miserably in explaining exactly what it is doing. “They’ve missed a perfect opportunity — and there are few like this — to transmit confidence to the labor market, a push forward that would allow jobs to be created,” he said.
Javier Galan of Madrid brokerage Renta4 said the reforms are a good start “but a lot more is needed.” It is not enough to stimulate job creation just by lowering severance costs for companies. Rather, he said, the government has to offer new incentives such as tax breaks for companies that take on new employees.
“It is necessary to go much deeper with labor reform,” he said.
Unions have called a general strike to protest the package, but not until Sept. 29.
The delay shows their jitters after a civil servants strike this month over wage cuts drew little turnout. “The unions are afraid the general strike will fail, and it might,” Galan said.
Also, it “makes no sense” to call a strike in the middle of summer when Spaniards head for vacation and lots of companies and factories essentially shut down, he said.
(This version CORRECTS name of central bank governor in paragraph 13.)
Tags: Barack Obama, Contracts And Orders, Europe, Labor Economy, Labor Issues, Madrid, North America, Personnel, Spain, United States, Western Europe
