Spain: Economy Seeks Urgent Government Reform
June 2nd, 2009
Spanish govt says economic problems to continue in 2010 – Unemployment, structural weakness, biggest obstacles – Treasury Secretary Ocana sees need for Labour reform – Econ Min Salgado does not rule out tax hikes for wealthy
Spain’s economy will not face an easy year in 2010 due to high unemployment, Spanish Economy Minister Elena Salgado said on Wednesday, as another senior government official said labour reforms were needed.
“Two thousand and nine will be a difficult year with a high degree of uncertainty and we have no doubt that 2010 will not be an easy year for the Spanish economy,” Salgado told Spain’s Congress on Wednesday.
The European Commission expects Spain to be the last country in the EU to exit recession, probably in 2011 and sees its public deficit and debt levels increasing more than in any other euro zone country bar Ireland due to heavy stimulus spending.
Fears about job insecurity in both service and manufacturing sectors were reflected in Spanish retail data on Wednesday which showed another hefty sales fall in April as households slashed spending.
Salgado said unemployment was far higher in Spain than other European countries due to structural problems and the collapse of a Spanish property boom which had already put over 800,000 construction workers on the dole.
With Spain’s unemployment rate at 17.4 percent and likely to hit 21.5 percent or more than 5 million by late 2010, according to Spanish savings bank consultancy FUNCAS, Treasury Secretary Carlos Ocana said it was time to reform the labour market.
“We can’t allow a far greater level of unemployment than in the rest of Europe and I think we are doing something wrong when the situation is like this. I think it would make sense to launch a reform,” Ocana said on Spanish National Radio when asked about the issue of labour reform.
Ocana was the latest high-ranking Spanish official to call for a job market shakeup after newly appointed Economy Secretary Jose Manuel Campa said he backed a reform to cut firing costs in new contracts and make collective wage talks more flexible.
Wary of stoking social tension, Spanish Prime Minister Jose Luis Rodriguez Zapatero has so far ruled out labour reform after unions threatened a general strike at any attempt to cut job protection.
Pressure is mounting for economic and fiscal reforms given FUNCAS forecasts the economy will contract 3.8 percent in 2009 and 1.2 percent in 2010, swelling the budget deficit to 9.2 percent of gross domestic product (GDP) this year and 11.5 percent the next.
Spanish unions have proposed tax hikes for wealthier Spaniards to ease the drain on fiscal accounts and Salgado did not rule out any measure to boost income.
“The government does not rule out any a priori measure that allows an improvement in the situation in terms of income and the equality of the tax system,” Salgado told Congress.
Story from The Guardian
