WHAT’S THE BIG DEAL ABOUT SPAIN’S LABOR REFORM?

At stake are the European Union’s pandemic reconstruction funds — the NGEU and MFF packages —  projected to reach €1824.3 billion, and the remedy for the precarious labor situation
in Spain due to the structural anomaly in hiring.

by Jack Wright

The Labor Reform (Law 21/2021) that was ratified by the Spanish Parliament last Thursday, 3 February 2022, by and of itself stands on its own merit. It was the result of intense nine-month negotiations at the end of which Antonio Garamendi warned that if “even a comma” was changed in the 52-page text during the Congressional debate in Congress, the CEOE (Confederación Española de Organizaciones Empresariales or Spanish Confederation of Employers’ Organizations), of which he is the president, will back out of the Labor Reform.

Antonio Garamendi, CEOE president: he took up a statesmanlike position during the negotiations for the Labor Reform

Law 21/2021 seeks, above all, to address the precarious situation of labor. The goal is to reduce the all too temporary nature of many work contracts that hit young workers especially hard. It seeks to address the structural anomaly of hiring. For example, it limits most temporary contracts to a maximum of three months and reinstalls collective bargaining for pay and work conditions.

It is by no means a total overhaul of the overly business-friendly regulations adopted by the PP government in 2012. For one thing, the cost to an employer of firing an employee on a permanent contract has not been increased. This is why some minority leftist parties, such the Esquerra Republicana de Catalunya (ERC) —  in English, the Republican Left of Catalonia —  withheld their support. Said ERC spokesperson Gabriel Rufián, “There is room for improvement” in the Labor Reform.

Second Vice President of the Central Government and Minister of Labor Yolanda Díaz: she headed up the government team at the  bargaining table

But after everything has been said and done, the Minister of Labor and Second Vice President of the Government Yolanda Díaz told El País, “Since March we have been in a dialogue with the parties that have been supporting the government on these reforms, and we are going to continue to do so with discretion and with the conviction that dialogue is possible.” She added, “This agreement improves the lives of the workers in this country.”

The BBVA Research (BBVA for Banco Bilbao Vizcaya Argentaria) is, per its own website, “a benchmark for research and economic analysis in different countries in the Americas, Europe and Asia”. And it points out that “for decades, the inefficient and unfair functioning of the labor market has been one of Spain’s weaknesses. High unemployment explains about half of the gap with Europe’s most advanced economies in terms of GDP per working-age person.”

The European Commission released the first installment of Spain’s share of the multi-billion NGEU funds as soon as the Labor Reform went into effect

For this very reason, the European Union has taken it upon itself to condition the awarding of the European NGEU funds to Spain on the very Labor Reform that was ratified by Congress last 3 February.  The Next Generation EU fund is a European Union economic recovery package to support member states adversely impacted by the COVID-19 pandemic. The fund, worth €750 billion, is operational during the 2021-2023 period and will be tied to the regular 2021–2027 budget of the EU’s Multiannual Financial Framework (MFF). The combined NGEU and MFF packages are projected to reach some two trillion euros.

European Commission: the roundtable convened to re-energize the post-COVID19 EU

As soon as the Labor Reform went into effect via the Royal Decree (Law 21/2021), the European Commission released the first installment of Spain’s share of the funds. But to unlock the rest, the Spanish parliament must ratify the Law.

For years the European Commission has been sending Spain concrete recommendations to correct the structural anomalies affecting the Spanish labor market and the country’s economy negatively. In the end, the Commission has had to resort to a warning of no-reform-no NGEU-funds. Consider the following figures: jobless rate among Spaniards under 25 years of age was 29.2% as of November 2021. The national rate was 14.1%. The 19-country eurozone average as of that month was 7.2%.

To block the ratification of the Labor Reform was tantamount to blocking the crucial NGEU funds, the Spanish coalition government, other political parties, mostly leftist, and pro-Reform citizens say.  Moreover — and this is more important over the long haul — to support the Labor Reform is to alleviate the workers’ chronic regrettable plight.

Related posts:
Labor Reform in Spain: To Err is Divine?
€140,000 Million of European Funds Brighten Up the Spanish Panorama in the New Year
The Economy of Spain: Everything Coming Up Roses?

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Images
Featured image/Bridesward from Pixabay
Garamendi/Diario de Madrid, CC BY4.0
Yolanda Diaz/Pool Moncloa, Borja Puig de la Bellacasa
€500 bills/Friedrich Haag, CC BY-SA4.0
European Commission roundtable/©European Union