• February data.The average Social Security pension exceeds 1,000 euros for the first time in history
  • Report: The IMF warns the Government that the labor reform improved employment and did not affect poverty in Spain

"The risks to the general fiscal sustainability of Spain remain significant in the medium and long term. In particular, the Government plans to permanently link pensions with the CPI and dissociate the initial pension levels from changes in life expectancy, in the absence of adequate compensatory measures, it would significantly increase spending on medium and long-term pensions and worsen intergenerational equity. " The European Commission warns this Wednesday in a long report on the Spanish economy full of lights and leftovers .

"Spain has enjoyed six years of strong economic growth accompanied by a dynamic creation of employment. Between 2013 and 2019, real GDP grew by 16.5% and employment by 14%, well above the euro area average However, some structural weaknesses and legacies of crisis have not yet been completely overcome, "says the evaluation that is part of the so-called Winter Package.

On pensions, in particular, the paper highlights that the return to indexation to the CPI takes place "in a context where the future adequacy of pensions is expected to be, on average, higher than that of the EU , and poverty affects mainly to the younger age groups, including children. " The European Commission has been with a clear position on pensions and Spain for years. The technicians and the institution in general welcomed the reform applied by the Executive of Mariano Rajoy after consulting the experts coordinated by the sociologist Víctor Pérez Díaz. And he criticized the change that the Government itself applied, as required by the PNV, in recent months in power.

The same applies to the labor reform, an incomplete instrument that has not corrected many of the imbalances, but which in Brussels considered a step in the right direction. Therefore, the possibility of a counter-reform by the PSOE and UP coalition is disturbing. "The new Government has announced changes in the regulation of the labor market. It is recognized that the reforms adopted in 2012-2013 in response to the crisis have played an important role in promoting the economic recovery rich in jobs that began in 2014 (. ..) It will be important that any new measure is only taken after a careful evaluation of its potential impact and that the achievements of the previous reforms are preserved, "say the experts on two of Pedro Sánchez and Pablo Iglesias' great commitments for the legislature.

The threat of high debt

The report, with more than 100 pages, gives an overview of the entire economy. "High external and internal debt, both private and public, remains a source of vulnerability . Unemployment has declined, but too many people remain unemployed or struggling to make a decent living. Economic efficiency, measured by total productivity of The factors remain moderate, due to low innovation in many companies and regions, regulatory fragmentation, market barriers, labor market segmentation and skills gaps. Spain is also one of the European countries most exposed to change climate, which poses important political challenges for water and waste management, energy and resource efficiency, emissions and renewable energy, "can be read.

The country-to-country analysis of macroeconomic imbalances indicates that Greece, Cyprus and Italy "still experience excessive imbalances," while Germany, Ireland, Spain, the Netherlands, France, Croatia, Portugal, Romania and Sweden "still have imbalances."

There are no big surprises because weaknesses are well known . Indebtedness, unemployment, very low productivity and even declined in 2018 and 2019, lack of innovation, the high percentage of people at risk of poverty, and especially children. And more classic: bad energy and rail connections, which "prevent Spain from fully benefiting from the Single Market". And the abuse of temporary contracts, because "the proportion of employees with a temporary contract is the highest in the EU, with around 26%" and this has a negative impact on "the formation of human capital, which prevents further growth rapid labor productivity. Temporary contracts are increasingly shorter and commonly used even in sectors with little seasonality. Labor subsidies are not effective in promoting stable jobs, "the documents warn.

The report also points repeatedly to one of the great weaknesses of the Spanish economy, the public debt ratio: " Current debt levels are a source of vulnerabilities for some Member States and an impediment for governments to execute macroeconomic stabilization. when necessary. In Italy, Belgium, Spain and France, the ratios have not been reduced, despite favorable economic and financing conditions in recent years, "said the community technicians.

Exposure to climate change

And attention to Climate Change. As in 2019, the EU warns that " Spain is one of the Member States most exposed to climate change . Adaptation, risk prevention and resilience to disasters require investments. The infrastructure for water and waste management is unequal across the country, which poses significant environmental challenges. In some urban areas, air quality is also a problem. At the same time, Spain's income from environmental taxes remains among the lowest in the EU ":

The report on the health of the Spanish economy is part of the so-called European Semester, a whole process that goes from the analysis of the budget drafts, which are sent to Brussels before October 15 of each year, to the country-specific recommendations, after the evaluation of the National Reform Plans and Stability Programs, which are sent to the Commission every April. Before, these analyzes of the winter package and the Country-specific Recommendations were published simultaneously, but they have been separated for some time to improve the dialogue between institutions and capitals.

The case of Spain is still anomalous because it still has no Budget for 2020 and has been extending those of Cristóbal Montoro for more than two years. The whole test, therefore, is that of an economy in an atypical situation, which has been limited to what is known as no policy changes , extensions without substance changes in economic policy.

If compared precisely with the recommendations issued last year, the result is not very satisfactory and "limited progress" stands out. There is positive news, for example, with regard to "measures at the central and regional levels to modernize and increase the capacity of public employment services, as well as to improve their cooperation with social services."

Worse is the balance in the "institutional framework that governs the management of public finances," which "has not been strengthened." The Commission points out that "if recommendations derived from expenditure reviews by the independent tax authority (AIReF) were implemented, it would increase the potential to increase the efficiency and effectiveness of public spending in various policy areas." The same applies to the "newly created governance structure for public procurement, which is not yet fully operational. The adoption of the national public procurement strategy planned for 2018 continues to be delayed," the report says.

Temporality

The criticism also extends to efforts to reduce the use of temporary contracts in the private sector, which "show limited success . The action has focused on combating abuse and not on the drivers of the widespread use of temporary contracts," Brussels experts say. And "the Government has not yet taken steps to simplify the system of national unemployment assistance. The coverage and adequacy of regional minimum income regimes remain low in many regions. The measures taken in 2019 to improve support for families they are positive, but they can have a very limited impact on poverty reduction. "

On employment and the possibility that the labor reform may be reversed, in part or in its entirety, the comments are prudent, but incisive . "The new ruling coalition has promised changes with the established objectives of restoring the bargaining power of workers and overcoming the segmentation of the labor market," he said in a report. "Changes in the collective bargaining system would include the abolition of the one-year limit to the automatic extension of expired agreements (ultraactivity) and the restoration of the priority of sectoral collective bargaining over agreements at the enterprise level. Other measures still not specified would aim to promote permanent contracts. A review of some types of contract resolution is also planned, "they review. But any change must be made with a detailed analysis, something that, they fear, is not happening.

As in all reports for a decade, there is a reminder about the Market Unity Law, a constant claim but whose "implementation progresses very slowly."

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