Continuity in employment policy likely under new government

Download article in original language : ES0404102NES.DOC

The general election held in Spain in March 2004 resulted in defeat for the governing People’s Party (PP) and victory for the Socialist Party (PSOE), which is to form the new government, led by José Luis Rodríguez Zapatero. The PSOE's programme indicates that in term of economic and labour policy it will continue with the current basic model.

A general election was held in Spain on 14 March 2004, three days after the terrorist attack in Madrid, which killed close to 200 people and injured 1,400. The immediate run-up to the election saw solidarity events with the victims and protests against the centre-right People’s Party (Partido Popular, PP) government, and there was an extremely high turn-out in the poll (77.21%). This was thought to have contributed to the unexpected result, with the Socialist Party (Partido Socialista Obrero Español, PSOE) obtaining 164 of the 350 seats in the lower house of parliament, with 42.64% of the vote. The PP - which had been in office with an absolute parliamentary majority since 2000 - won 148 seats, with 37.64% of the votes.

The Catalan nationalist parties - the conservative Convergence and Union (Convergència i Unió) and social democratic Republican Left Party (Esquerra Republicana de Catalunya, ERC) - increased their presence in the national parliament to 10 and eight seats respectively. The christian democrat Basque Nationalist Party (Partido Nacionalista Vasco, PNV) won seven seats. The United Left (Izquierda Unida, IU) obtained only three seats and will form a parliamentary group with the two members of the 'eco-socialist' Initiative for Catalonia/Green Party (Iniciativa per Catalunya-Verds, ICV) and possibly with the one representative of the left-wing regionalist Aragonese Union (Chunta Aragonesista). The conservative Canary Islands Coalition (Coalición Canaria) won three seats, the left-wing Galician Nationalist Bloc (Bloque Nacionalist Gallego) two seats, and the centre-left nationalist Basque Solidarity (Eusko Alkartasuna) and Navarran Basque nationalist Nafarroa-Bai one seat each.

The new government is to be formed by the PSOE, with its leader, José Luis Rodríguez Zapatero, to become Prime Minister. Mr Zapatero describes himself as 'socialist libertarian', and is seen as having a tolerant attitude on social questions and civil rights, while being an orthodox neo-liberal with regard to economic policy. He has said that the state will not intervene in production, so he is not expected to reverse previous privatisations.

Mr Zapatero suggested before the elections that he would propose Antonio Gutiérrez, a former general secretary of the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), as the Minister of Labour. In order to foster employment stability, the PSOE is considering the possibility of extending the trial period under open-ended employment contracts as part a future labour market reform. The aim is to increase productivity and reduce the percentage of contracts that are temporary. However, it has not yet been stated how long this trial period would be - if it it is too long it would defeat the purpose of open-ended contracts, critics claim. In general, the PSOE's programme in the labour area indicates that it will continue and further the current basic model.

This is also true of economic policy. The Minister of the Economy is likely to be Pedro Solbes, a former European Commissioner who is a well-known defender of the EU Growth and Stability Pact and of a zero budget deficit. The new government's policy is thus likely to involve reducing taxes and maintaining fiscal pressure by fighting fraud. Personal income tax will probably become less progressive, with only one or two brackets, while tax-free income may be raised to EUR 10,000 per year, plus EUR 3,000 per child. Mr Zapatero has promised to reduce company taxation from 35% to 30%, while eliminating the set of deductions that, according to his analysts, mean that in practice companies pay less than 30%. He is in favour of eliminating tax on inheritance, donations and assets for people with low to middle incomes. Furthermore, the VAT rate for some basic consumer items will be reduced. To stimulate productivity, the new government is expected to promote investment in research and development (at present 1% of GDP) and to adopt a model of growth that places less emphasis on consumption and construction.

The new government has stated that it will will block the previous administration's recent law on the quality of education (ES0206213F).