Sánchez speaks with his first and second deputy prime ministers in parliament. / EFE

Crisis in government coalition over repealing labour market legislation

It was a condition of Unidas Podemos joining with the PSOE in 2018 that a 2012 law unpopular with the left was reformed


The left-wing coalition government of radical Unidas Podemos (UP) and Socialist PSOE this week faced its biggest test of unity since coming to power.

Both political allies have been arguing in public and behind closed doors over how to overturn parts of labour market legislation enacted by the conservative Partido Popular when it was in power in 2012, and who will lead that reform. It was a condition of the smaller UP joining the PSOE in government in 2018 that the laws would be changed.

The more left wing members of government see the 2012 law as limiting workers' rights and creating unstable jobs. Leading proponent of this faction is Minister of Work, Yolanda Díaz, part of the UP. Díaz is also second deputy to PM Pedro Sánchez.

EU concerns

Meanwhile, Minister of Finance - and first deputy prime minister - Nadia Calviño of the PSOE is less keen on undoing the PP's work, a view reportedly shared by the EU, that sees it as making Spain more competitive at a time when the country is due to receive a lot of European funds.

After the argument over whether Yolanda Díaz or Nadia Calviño would be leading the process for the reform, on Tuesday this week an uneasy truce was reached with Díaz representing the government in negotiations with unions and bosses, but Calviño having the last word on what was agreed. This left the real fight - on the content of the reform - between both sides for next week.

The detail of any revision partly centres on increasing once again the role of collective bargaining in different industrial sectors, reducing the power of employers to fix their own conditions for staff. UP is suspicious that the PSOE doesn't want to go this far, although Pedro Sánchez denies this in public.