Brussels is openly praising the Spanish recovery plan. Despite the praise, in his analysis he also points out some warnings or cautions that the Government must take into account when facing the reforms of the labor, pension and fiscal markets. Regarding labor legislation, the European Commission asks that, although collective bargaining is involved, flexibility within companies be respected, so that they can adapt to economic cycles and maintain productivity. This is an express limit to the reform negotiated by the Ministry of Labor, the unions and the employer’s association.
The approval of the Commission to the Spanish recovery plan is generally very laudatory. “It is expected to have a high impact when it comes to reinforcing the potential for growth, job creation and the economic, social and institutional resilience of the Member State”, highlights the Community Executive on the Spanish proposal, in a clear contrast to the language that he used when he demanded measures from the governments of Zapatero or Rajoy. The plan helps to face the ecological transition, digitization and the economic and social challenges highlighted by the specific recommendations of the Commission, emphasizes on several occasions the documentation released by Brussels.
However, almost like a nun’s pinches, the Commission papers drop some warnings in the labor, tax and pension spheres, precisely the matters that have been left open pending what the social agents agree to and the report of tax experts.
On the labor reform, Brussels makes a positive assessment: “In general, Spain’s recovery plan includes measures to reduce labor market segmentation [entre fijos y temporales] and to reinforce active policies that are likely to improve the functioning of the labor market ”. Even so, the Commission also expresses its precautions and establishes the limits of what can be touched: “The changes will not result in disproportionate obstacles for companies to adjust to the cycle and respond to the evolution of productivity.” This statement is included in the annex to what the European leaders sign and is, therefore, mandatory. Internal flexibility in companies is one of the points that the 2012 labor reform facilitated and that the Ministry of Labor now wants to limit, because it considers that it makes workers precarious. The vice president of the European Commission, Valdis Dombrovskis, already reacted at the end of March defending the company agreements.
The Commission services note that a report will be made ex ante to assess the shortcomings of collective bargaining. And they recall that the 2012 labor reform already led to a recovery rich in job creation. Work explains that this report on collective bargaining is a mere administrative procedure, that Brussels has described its measures very positively and that progress is being made in bargaining with employers and unions to reform collective bargaining.
Amid the positive tone with which all the measures are welcomed, the documents give a certain touch of attention to the adjustment in public accounts. “The plan partially contributes to tackling existing vulnerabilities from a fiscal point of view,” he says. That is to say, in Brussels they admit that fiscal measures may later not be sufficient to correct the gap. And that is stated in the 19-page paper to be signed by the 27 leaders of the EU and which is legally binding. However, there is not much more emphasis as the escape clause of the fiscal rules is activated for now. Of course: in the first quarter of 2023 the tax reform that comes out of the report of recommendations of the experts will have to come into force, coinciding with the year in which the demand to start straightening the public accounts will probably be recovered.
These reforms “will aim to make the tax system more efficient, increase revenues, support the ecological transition and promote equity”, is stated in the milestones to which the Government has committed with Brussels.
Counteract the effect of linking pensions to the CPI
And the third warning refers to pensions, although this is already made in the document produced by the Commission’s staff, which is not strictly mandatory. This paper indicates that the proposed measures may not fully counteract the increase in spending caused by the revaluation of benefits with the CPI and the aging of the population. “In the event that the compensatory and complementary measures are not sufficient to comply with the Commission’s recommendations regarding fiscal sustainability, the fiscal impact of the increase in pension spending would have to be further mitigated with proportional fiscal adjustments in the future. ”, He highlights. That is to say, it allows a partial reform to be made, and that the gap that may occur be addressed later. The current reform proposed by Minister José Luis Escrivá transfers the existing deficit to the accounts of the Treasury, where it is assumed that there is more room to face it, says the recovery plan.
One of the milestones included in the plan – and therefore a reference that must be met in order to achieve a disbursement of European funds – is that by the end of 2022 “updated projections are published that show that the pension reforms undertaken in 2021 and 2022 guarantee long-term budgetary sustainability, also taking into account the impact of other structural reforms, such as labor reform ”.
The measures that are agreed with the social partners in pensions “should be compatible with the fiscal sustainability of public finances in the medium and long term,” recalls the proposal that the Council has to sign. The same is also held regarding the new structural ERTE system that the Executive of Pedro Sánchez wants to implement.