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01.02.13 - 21:20 -
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Some noteworthy statements emerged from this week’s Madrid meeting of the European Trade Union Confederation (not, if we’re being honest, the first organisation you might look to for pithy one-liners).
Speaking to journalists after participating at the conference, held to mark the 40th anniversary of the EU-wide labour organisation, European Commissioner for Economic and Monetary Affairs Olli Rehn said that “if there has been a serious deterioration in the economy” the EU will consider an extension in Spain’s “adjustment path”.
The word “if” at the beginning of this remark seems to leave room for the sunny prospect that Spain’s economy might not be deteriorating.
However, just released GDP figures showing a 1.8 per cent contraction in 2012 rather block out any comforting rays of optimistic sunlight, as do statistics showing that consumer spending in Spain fell by more than ten per cent in December.
Commissioner Rehn’s statement prompted a frenzy of speculation that Brussels might temper its demands for further austerity – or at least expand the timeframe in which sacrifices are to be made – but this tended to obscure the other part of Rehn’s message. Commending already-implemented labour reforms which, he noted can help boost Spanish productivity, he stressed that the overall strategy of spending cuts and tax hikes must be “growth-friendly.”
This may prompt some bitter amusement in a country where austerity has so far been decidedly unfriendly towards growth. In fact it has been positively hostile.
But Rehn’s point is valid nonetheless. In his remarks to trade unionists he emphasised that austerity makes no sense without a coherent programme of related reforms that will make the business environment less challenging for small businesses, reforms that will facilitate innovative start-ups and that don’t just make it easier to fire people but make it easier to hire people too.
Red carpet
The urgent need to tackle unemployment was echoed at the Madrid conference by European Parliament President Martin Schulz, who called for a “binding commitment” to job creation, especially for young people, and by Labour Minister Fátima Bañez, who promised that in February the government will unveil a range of administrative and fiscal measures to boost employment. Indeed, she said, the authorities will “lay out the red carpet” for young entrepreneurs.
Prime Minister Mariano Rajoy’s office issued a characteristically dour statement (as if it might be necessary to dampen any irrational exuberance among Spanish entrepreneurs giddy at the prospect of strolling up that red carpet) that the job-creation package “will not in any way undermine the government’s commitment to reducing the deficit”.
Perhaps the most significant thing about this statement is that the prime minister’s office believed that it had to be made. Far from hindering deficit reduction, job creation will make it easier to achieve.
Job creation is the growth-friendly part of consolidating public finances. Without it, all you have is tax hikes and spending cuts.
Extra cash
It is possible to argue, as Mr Rehn did when speaking to journalists along with Economy Minister Luis de Guindos, that substantial progress towards stabilising Spain’s public finances has already been achieved, and one tangible result of this is the steep rise in government revenue.
In 2012 the tax authorities collected almost 170 billion Euros, a rise of nearly five per cent over 2011. (A substantial chunk of this came as a result of the increase in VAT from 1 September, which in turn had more than a little to do with the precipitate drop in consumer spending at the end of the year, but that’s another story.)
Since increased welfare costs will eat up most of this additional revenue, policymakers in Madrid are not rubbing their hands with relish wondering what to do with all the extra cash.
On the other hand, Spanish entrepreneurs and small businesspeople will no doubt wait with keen anticipation for the government to roll out its red carpet on 20 February, when the prime minister is scheduled to launch his new job creation strategy. It would be a cruel blow to these people – and to the workers they may be able to employ – if the new measures fail to live up to expectations.
To read more by Anna Maria O’Donovan visit


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