Reforms Up, Reforms Down

Tough Consequences of the Spanish´s Crisis

During the past months Spain has lived in a period of unrest due to the acceptance of the General Budget for 2012. The right-wind government has been subjected to numerous criticism from the labor unions and the opposition party (PSOE). This controversial situation requires knowledge of divergent opinions to get a more complete view of the near future in Spain and to evaluate long term consequences.

Traditionally, the North of Spain has supported right-wind parties and the South of Spain has lived under more left wind parties. However, this situation is not black and white. Two members of Santander´s Worker Union in the North and an employee of the Spanish National Bank in Andalusia in the South of Spain will give different perceptions on what it is happening in the whole of the country.

To a certain extent, the most objective opinion will be provided by José Manuel Marañón a member of the Regional Executive of CCOO (Workers Commission) of Cantabria and the Foundation “May 1” union.  As a side-note, May 1st is when Spain celebrates the day of the worker. On one side, General Secretary of the Teaching´s Federation Javier Ramírez Diez will contribute his view regarding the worker´s union opinion in regards to the related issue. On the other side, Joaquin Sanz Ramirez, a banker from the Popular Spanish Bank (formerly Andalusia´s Bank), will also help us understand more clearly the measures taken by the Government of Mariano Rajoy, leader of the People´s Party (PP).

Spain, as many other countries, is involved in a severe economic crisis. The recent data provided by the National Statistics Institute (INE) has reported that Spanish economy shrank 0.3% over the three months to the end of March thus going back again into recession. This announcement makes it even more difficult to evaluate the positive results of the new austerity measures since they are thought to have influenced the decrease.

According to Manuel Marañón “the General Budget is deeply effected by bad policies from 2011 which will only increased unemployment and shift the economy into recession”. Up to this date, this is in fact the reality in Spain which has been displayed by many social demonstrations from workers and unions. The reasons of the last general strike (29th of March) and the following ones (1st of May) are propagated by “restrictive budgets, antisocial measures that require the middle and lower classes of our society to make far greater efforts than the rest”, as Ramírez Diez states when asked about the new law proposal of state budgets. However, Spain has to reduce its deficit from 8,5% to 5,3% by the end of 2012, which will involve taking austerity measures to keep expenditures within bounds. Joaquín Sanz puts forward a factual case because “the previous governments have had more expenditures  than income. They have caused a deficit in the current moment of world crisis that we can not bear. This has led to a drastic cut in this budget that we have to account for”.

It is necessary here to recapitulate the most important changes in respect to the prior law as well as the differences between previous and current governments. The objective perspective appeals to the reasoning that “these budgets share the same ideological source as previous ones, what means that the most important thing is to reduce the deficit by an adjustment of costs. Although it is true that they have gone much further in areas such as cuts in education, Research & Development and Innovation (R+D+I)”, as Marañon explains. However two divergent points come to light when the question is taken to the outliers stances:
Ramírez Diez denotes that “above all, the differences are in the importance given to social policies (education, health and social welfare), the exaggerated cut in the inducement of the economy through public works and public investment”. All these measures proposed in the draft budgets “are contrary to those that a progressive government that is committed to equitable distribution of resources  would pose”. On the other hand, Joaquín Sanz mentioned Margaret Thatcher when she said that the socialist governments work very well, as they spend the remnants left by previous governments. Historically all socialist governments that have survived and are still in power have left the country in debt and economic crises.

Next point on the table is labour reform where workers are the most disadvantaged because as Marañon describes “essentially, there are two measures that harm workers: cheaper and easier dismissal of workers, and the failure of collective bargaining (that individualized employment relationships). Perhaps the only measure that benefits is some improvement for receiving partial retirement through a relief contract”.

Nevertheless, Ramírez Diez thinks that “there are not any measures that benefit them.  And as for prejudice, I think all of them are very harmful to workers with respect to other taxpayers. They are unjust measures are that are causing more unemployment, impoverishment and social injustice.” Still, Joaquín Sanz accounts for the belief that  “this is not the whole reform. Given the number of companies and freelancers who have closed their businesses, it is more reasonable lower part of its workforce to save the company and keep the rest of the workers in it, than to fire them all. Perhaps if this had been launched before, probably we would not have the current 24% unemployment rate”.

This arguments can be pinpointed in real situations. For example, Marañon cites “the first effects of the reform have been felt, in Cantabria, in the industrial sector where employment was of higher quality. The ideal case is the British company B3 Cable Solution which raised an ERE's of Extinction (Record of Employment Regulation) for 130 workers, and the rest had to lower their wage by 10%”. This, and other cases will lead to the question of if unemployment will rise with this Labour Reform. “In fact, this very government expects unemployment to increase by 600,000 people reaching six million unemployed by  the end of 2012”, Marañon reveals.

Ramírez Diez manifests his concerns: “Yes, we are seeing and suffering it already in many companies, and the local and regional administrations have also joined the bandwagon”. In spite of this statement, Joaquín Sanz remarks that “we should first clarify that the spirit of this law is to help employers. Employers could find a cheaper way to reduce workforce when they can not pay them as well as a way to increase their production and market penetration of their product. On the other hand workers should not see that this law is just looking for firing them. Then, both (employers and workers) fulfill their responsibilities and work. I understand that eventually the situation will stabilize and a recovery will begin”.

The Spanish unrest concerning these circumstances could lead to more social protest as the three interviewees perceived. Here, all agree on the following: Marañon comes to the point that “there will be more protests. Another thing is that they will result in severe social unrest which it will depend on the degree of desperation of the most harmful groups hit by the crisis”. Ramírez Diez gets to the bottom of this, saying that “if government policies do not change, they begin to negotiate with social partners, give collective bargaining the importance it has, change labor reform in the parliamentary process, mobilization of workers and students with trade unions”. Also, Joaquín Sanz describes this scenario as “inevitable”. He even remarked upon the context: “when Spain is not ruled by left wing parties, demonstrations are common. Nevertheless, I would ask the unions to act responsibly to all get us out of this situation, especially when we have more than 5,200,000 unemployed”.

This seems to have no short term solution, but negotiation between parties. Marañon and Ramirez Diez analyze the union action as “if the government does not sit down to negotiate labor reform and continues down the path of cuts in social spending and public investment, unions will continue campaigning”, explains Marañon. Also Ramirez Diez has a point in “urge the Government to arrange and offer the negotiation as the solution to all conflicts”. Here, Joaquin Sanz, as a citizen, “hopes they are responsible and deal with the situation in which we are in”.

The current Government has made reforms, cuts and adjustments all over the budget. There is a way to come out of this crisis for Spain. President Mariano Rajoy bets on these solutions. Although, there could be other directions to address the situation. Marañon emphasizes over a call on the government dialogue, “since February we are in a sustained process of mobilization calling on the government dialogue. But to their deaf ears we have been forced to the extreme measure of the general strike”.

Ramirez Diez expounds in regards to alternatives: 
“Fiscal reform, taxes on large fortunes, a different tax from the SICAV (Investment Company with Variable Capital), a commitment to the fight against tax fraud to improve revenue and reduced spending on issues that do not compromise what we know as the status of welfare (education, health, dependency, social policies), such as defense”.
Besides, Joaquin Sanz has confidence in “waiting a reasonable time to see if the expected results are reached. There are always many other possibilities and none have a magic wand to solve problems 100%. They are a wealth of skills and attitudes that determine the results thereof. Measures should be taken by governments in this very moments, although leaving open the possibility of being modified if the desired results are not met”.

Spain is not the only country who is suffering the consequences of the financial crisis. On the global perspective Germany has supported Spanish measures. Notwithstanding, divergent opinions claiming aptitude in the field. Marañon offers an explanation of the current situation when says that “”Germany has been extolling the cutting measures in the countries of Southern Europe since 2009 and it seems that in general, things are not improving much. Is a real change necessary in economic policies”. According to this idea, Ramírez Diez interprets that “Germany is one who has, or at least given its approval to the budgets. That is good for Germany. But these budgets are not good for Spain. They are bad, antisocial, depressive, unfair,... will not generate any economic recovery and we will sink the country further into economic depression.”

On this very end, Joaquin Sanz defined this reform as “very similar if not equal to the one taken in Germany with the unification of the German states”. Also, he goes on step further when illustrates that “time is something that will let us know whether this reform will start recalling the recovery and the revival of our economy and the reduction of unemployment, something that all Spanish are wishing. 

A country with a low rate of unemployment is a country alive, active, with social improvement, quality of life... in short, what we hope to achieve for the great country of Spain”.

As this article is being written, Spain is recoiling from yet another economic hit.  Bankia, an important bank in Spain, is in the process of being nationalized by the Spanish government after reporting huge losses.  This is yet another speed bump on the road to economic recover y for Spain. The high deficit and debt along with the high rate of unemployment make the situation more complicated to find the best solution between different political parties, associations and workers to unravel.  With this in mind as the sun dawns once again on the Iberic Pennisula, the Spanish people are hoping for a long awaited solution that will ease the current situation. 

Joaquín Sanz Ruiz

Javier Ramirez Diaz

José Manuel Marañón