Reforms ‘Will be a Milestone for Spain’, Says Rajoy

Reforms "will be a milestone for Spain" - Rajoy
Reforms “a milestone for Spain” – Rajoy

Spanish Prime Minister and leader of the PP, Mariano Rajoy, has announced his own new and ambitious structural reforms which, he stressed, “will be a milestone in the modernisation of our country”.

In his address to the PP National Executive Committee, earlier this week in Seville, Rajoy used Spain’s success at the recent European Council summit to launch an optimistic message and reiterate his “reformist speech.”

El Mundo reported that Rajoy welcomed the outcome of this Council, but said that Spain will now “step on the accelerator”. “We will do more and we will do it well,” he said, not without warning of the announced reforms which will have their effect “later”.

Notice to the Regional Governments

Rajoy targeted four immediate reforms – energy, the Administration, unity of market and regulatory bodies – and launched a very specific message to the autonomous communities. In the absence of all the regional chairmen of his party, Rajoy warned that they should make “greater efforts” to reduce the deficit.

Without specifying much beyond his commitment to deficit reduction and the reform of the financial system, the bulk of his speech was aimed at passing on his optimism to the Spanish people.

“I know that the current circumstances are complicated,” Rajoy said, “we have not reached this position by chance or bad luck, but because things have not been done well. As those of you know who protest the government decisions. There are reasons for concern but many more to overcome it. But there is no room for discouragement, and the first step towards success is knowing that we have the best goals to achieve it”.

“I have no doubt that we will,” Rajoy insisted, “I want to convey to you here that I am absolutely convinced that Spain has a great future. Absolutely convinced.”

Courage and confidence

The Prime Minister even specially thanked the collaboration of the Spanish in the Government tasks, saying “The attitude of a great many Spanish fills me with pride,” and “thanks to the Spanish for the courage and the confidence with which they are taking this situation.”

“We Spanish have every reason to trust ourselves. Even at the worst times we have lost the enthusiasm to get ahead. We are not going to sit and wait for things to change, we change them ourselves. I am fully aware that the Government can not do everything, but it can do everything in its power to develop the full capabilities of the Spanish, and so benefit Spain and each other.”

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Spain will survive the crisis

Spain will not only survive the crisis but will come out of it “strengthened”, according to Luis de Guindos, the Spanish Economy Minister.

“Spain is a country that has made mistakes in the past and accumulated imbalances. It is now in the process of correcting all these problems”, de Guindos said, talking to German newspaper Frankfurter Allgemeine.

He went on to say that “We will put our budgets in order. Our government, elected four months ago, has an absolute majority in parliament and a clear mandate for savings and reforms. With this we will succeed.”

In response to questions regarding the 25 billion euros in budget cuts recently announced he said that financial consolidation is inevitable, “The previous government left us with a deficit of 8.5% instead of the 6% forecast”.

“We must therefore make further efforts even in the midst of a recession, and we must restore confidence, especially in the Spanish economy. That means not only reaching a deficit of 5.3% this year, but 3% in the coming year. We are committed to that goal”, the minister explained.

De Guindos once again stated that “what we are doing is absolutely necessary. Spain currently has a funding problem. If the markets do not see consolidation then state funding could get more expensive. And that could lead to difficulties in the private sector also. Therefore it is essential to control the deficit.”

Although there were mixed reactions to the Spanish budget amongst EU members de Guindos is convinced that “the markets will react positively when they have studied our budgets in detail”.

Furthermore De Guindos recognises that 2012 will be a difficult year for Spain but “it will also be the year in which we will lay the foundations for recovery. The government is aware of this and does not want to raise false expectations for this year’s forecast. It will be hard with less growth and, unfortunately, more unemployment. But we will be laying the foundations for a better 2013.”

While recounting the first 100 days of the PP government de Guindos pointed out that he had approved a law of stability which “applies to all: central government, autonomous regions and municipalities,” and had approved labour market reforms which would “change the system largely responsible for high unemployment.”

“Therein lies the weakness of our economy,” said de Guindos referring to the countries huge unemployment figures which are likely to increase slightly this year before dropping in 2013.

De Guindos announced further steps to improve the struggling country including “reform of public services, especially health and education.”

He also mentioned reforms within the banking sector that “will get rid of the weakest” and will mean “a much healthier financial sector with fewer, but stronger, banks.”

Labor reforms fast-tracked

A number of arrests were made
A number of arrests were made

Spain’s new conservative government, led by Mariano Rajoy, have approved desperately needed labor market reforms as part of a drive to revive a failing economy and solve Europe’s worst unemployment rate of nearly 23 percent.

The plans are designed to encourage companies to hire more people by simplifying the hiring and firing procedures and offering tax breaks for employing young people.

However, the fast-track approval of the reforms resulted in violent clashes between riot police and protesters who say they will lose worker benefits.

Spain’s largest union is now calling for mass protests across the country on Feb. 19 in response to the changes.

Ignacio Fernandez Toxo, a spokesman for General Workers and Workers’ Commissions said the reforms “are brutal, they cheapen, facilitate and deregulate firing workers as the government’s only solution to unemployment.”

“We want to raise a clamor in the streets of Spain against the labor-market reforms,” said Sr Toxo, although he stopped short of calling for a general strike.

He added that the reforms “limit the rights of workers but offer no benefits for the people.”

The decree will reduce the cost of an unfair dismissal associated with an open-ended contract to 33 days a year worked, down from 45. More importantly, it will make it easier for employers to justify a fair dismissal with a cost of 20 days. Some economists and business leaders say the high costs associated with dismissal can act as a disincentive to hiring.

Under the new reforms, companies will be able to pull out of collective bargaining agreements and have greater flexibility to adjust an employee’s working hours, tasks and wages depending on how the economy and the company are doing.

Severance packages will also be cut from 45 days of severance pay per year worked to 33 days.

Nearly a third of workers in Spain are on temporary contracts, a huge percentage that makes the country’s jobless rate so volatile. From January 1st, 2013, temporary contracts must become permanent after 24 months. Zapatero’s Socialist government had introduced reforms in 2010 that allowed temporary contracts to run indefinitely.

Taking people off benefits will also provide employers with incentives under the new laws by paying the employer 50% of the unemployment benefit while the employee will continue to claim 25%.

This is sold as a 25% saving for the government. How? Usually when someone gets a job they come off benefits so how is this going to save money? You get a job and continue to receive benefits – surely that’s spending more, not less.

One protester, Cristina Fernandez, waved a placard saying “Every cut mutilates my rights” and said the labor reforms won’t achieve the government’s goals in reducing unemployment.

“To reduce unemployment, you need to create jobs, not simplify firing,” she added.

It seems to me that there is nothing in the reforms for me, and the rest of the workers that keep Spain alive. Only the companies that choose to treat employees like numbers seem to be gaining anything here. They can dump you cheaper and easier than before.  This will do nothing to reduce the unemployment level in Spain. If anything, it will increase the numbers as it’s almost certain that many people who were in secure positions before will now become victims of the new “easier-to-justify-and-cheaper-dismissal” laws.

Rajoy expecting strikes over labor reforms

Mariano Rajoy
Expecting strikes

The Spanish Prime Minister, Mariano Rajoy, has told European partners he believe’s labor reforms, to be adopted in mid-February, will likely cause strikes.

“The labor reforms will cost me a strike,” Rajoy whispered to Finnish Prime Minister Jyrki Katainen, apparently unaware that the cameras were watching and the microphones listening.

The EU has said Spain should give priority to the labor reforms to reduce the high level of unemployment in the country but Rajoy thinks there is trouble ahead.

“Now comes the hardest thing,” he said to Dutch Prime Minister, Mark Rutte, adding that the reforms will leave “a very bad legacy”.

After meeting with José Manuel Barroso, the president of the European council, Rajoy confirmed that the restructuring of the financial system will be adopted next Friday and the new labor reforms will be ready in February.

I look forward to reading the details of the reforms – some will no doubt benefit but I’m sure the majority of people will be in the same position that there are in now, or worse!