Spain tries to bolster faith in its economy

City A.M. Reporter
SPAIN will not bow to union pressure and revise a €15bn (£13bn) austerity plan, Prime Minister Jose Luis Rodriquez Zapatero said yesterday.

“I know there are protests by those who do not share them (government views), like the unions, but we will not change,” Zapatero told his Socialist party in Elche, southeast Spain.

His comments came just hours after the Bank of Spain was forced to take over the running of Spanish savings bank CajaSur after its planned merger with another of the country’s small lenders failed. CajaSur – which has been under the control of the Roman Catholic Church – will now have access to a rescue fund.

With the Greek debt crisis shaking world markets, Zapatero is under pressure to make spending cuts while pushing through long-awaited labour reforms to avoid a similar loss of confidence in Spain.

“No one can doubt at any time that Spain is a strong country and an economic power that will meet its obligations and pay debts,” he told a meeting of 2,000 Socialist mayors who face municipal elections next year. Earlier on Sunday, the leader of Spain’s largest union reiterated that he might call a general strike over cuts he saw as unfair and unnecessary.

Zapatero said he respected the unions, who have called for a strike on 8 June by civil servants who will have wages cut by an average of five per cent this year. He said cuts approved by the cabinet on Thursday would reduce social spending by 1.5 per cent, but that this had risen by 50 per cent since he took power in 2004.

“We have to make this effort to save now so that tomorrow the development of a welfare state and equal opportunities may continue,” Zapatero said in his first address to the party since he unveiled the cuts on 12 May. He reiterated calls for agreement on a long-awaited labour reform, which the government hopes to achieve this week in a country where one in five of the workforce are jobless.

“I call on society as a whole, especially businessmen and unions, to reach a good labour accord as soon as possible, so that young people may have more hope of finding work, and those with temporary contracts may have more hope of a stable job,” he said.