THE TIMES: That’s a relief. Spain’s Cabinet backed a new plan yesterday to shake up the rigid, 32-year-old labour laws. There’s still parliament to go, with a vote on Tuesday, and José Luis Rodríguez Zapatero, the embattled Socialist Prime Minister, will have to dig deep into the ranks of regional parties to win enough support. But if he had failed to get yesterday’s deal through, we could have expected the euro to plunge. Even so, rumours of a bailout of Spain by the International Monetary Fund, although denied by the fund, drove down the currency yesterday.
Greece may be Ground Zero of the eurozone crisis, but Spain, with an economy four times the size, matters far more. The real fear that drove Germany to pull together a €750 billion bailout last month was that Spain would default on its debt. That could bring down banks across Europe — in Britain, too — and cause the euro currency to unravel. That prospect prompted President Obama to add his personal exhortations to the German-led efforts, and China’s leaders to put off an interest rate rise.
Spain is also the best test of whether, despite the bailout, Europe will be hit by a second crisis. The drama has paused, as Greece and others have vowed to reform. But as scepticism about Hungary showed this month, many fear governments have promised cuts they cannot deliver.
Zapatero has promised a lot. He has taken a tilt at laws that have given gold-plated security to those in long-term work and in the public sector. No easy task: those laws, embedded in the 1978 Constitution, codify some of the most far-reaching social rights in Europe. They represent a rejection of the dictatorship of General Franco, who banned unions and strikes, and reflect the strength of the Communist Party during the transition to democracy. They have been one of Spain’s proudest possessions, but now they are strangling its growth.
Those rules have cut the country in half, creating a parallel economy of temporary, low-paid jobs with few rights. In the past decade, as Spain revelled in a property boom, construction created millions of contract jobs. Those have vanished; the white concrete skeletons of half-finished coastal apartment blocks are testimony to the sudden collapse. A fifth of the workforce is unemployed. >>> Bronwen Maddox, Commentary | Thursday, June 17, 2010
