Spain’s govt clears crucial labor reform and budget for 2022

Dec 28, 2021, 7:20 AM | Updated: 7:31 am

MADRID (AP) — Spain’s left-wing ruling coalition on Tuesday secured its hold on power with the approval of a landmark labor reform backed by both unions and employers and a new national spending plan for next year that includes a hefty disbursement of pandemic recovery funds.

An array of left-leaning and nationalist lawmakers gave the final go-ahead to Spain’s 450-billion-euro ($509 billion) budget for 2022, which allocates more than half of the funds to education, health, pensions, subsidies and other forms of social spending.

The budget includes the first 20 billion euros of 70 billion euros ($79.2 billion) total granted to the country from the European Union’s COVID-19 recovery funds. The European Commission, the executive branch of the 27-nation bloc, transferred to Spain an initial tranche of 10 billion euros ($11.3 billion) earlier this week.

The budget approval is seen as a crucial test of the parliamentary support of the minority coalition of Socialists and the anti-austerity United We Can party. By clearing the hurdle in a 281-62 vote with one abstention, Prime Minister Pedro Sánchez dispelled pressure to call an early election and increased his chances to see out his term, which ends in 2023.

His Cabinet also passed Tuesday a decree Tuesday that overhauls the country’s labor rules, a commitment by Sánchez´s government with the European Commission before the end of 2021 in order to secure the next instalment of EU pandemic funds.

The labor reform reverts business-friendly regulations adopted in 2012 by a previous conservative administration at the height of last decade’s sovereign debt crisis.

It limits most temporary contracts that are prevalent in the eurozone’s fourth-largest economy to a maximum of three months and brings back collective bargaining with unions as the main channel to negotiate contracts. It also adopts the furlough program used to avoid layoffs during the COVID-19 pandemic as a fixed tool for companies to turn to in future crises.

The reform has been sanctioned by workers’ unions and trade associations, a rare achievement for the government and a personal win for Labor Minister Yolanda Díaz, a former labor attorney who has become the rising star in United We Can, the coalition’s junior partner.

“This reform turns a page on the precariousness in Spain,” Díaz told reporters during a weekly news conference following the Cabinet meeting, referring to official data that shows that one out of four contracts in Spain is short-term, the highest rate in the EU.

The country’s unemployment rate, at 14.5% in October, is also one of Europe’s highest.

“I dare to say that there are young people and women who have not known a decent contract in their lifetime,” the minister added. “Now we are going to give them the opportunity to break with the trap of precarious lives.”

The new rules take effect Wednesday, although the government will need to find support once again from smaller parties to ratify the changes in a parliamentary vote early next year.

Sánchez’s minority coalition controls 155 of the 350 seats in the Congress of Deputies and has needed the votes of Catalan and Basque nationalist parties, among others, to pass legislation.

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Spain’s govt clears crucial labor reform and budget for 2022