Social partners disagree with government plan to balance budget using surplus social contributions

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The Spanish government presented its draft state budget for 2002 to the social partners in September 2001. Both trade unions and employers disagreed with the government's intention of balancing the state budget in 2002 using the surplus contributions of employers and workers to the social security and unemployment benefit systems.

On 18 September 2001, the Ministers of Inland Revenue and Labour met the the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) and the General Workers' Confederation (Unión General de Trabajadores, UGT) to inform them of the general lines of the draft bill on the 2002 state budget, which the government will shortly present to parliament. On 19 September, the Minister of Inland Revenue met the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) for the same purpose. The draft bill shows a change in direction from the government's previous aim of achieving a budget surplus in the coming financial year. The intention is now to balance the budget in the context of a slight slowdown in economic growth (the government has reduced its forecasts for GDP growth set out in the 2001 budget from 3.6% to 3.0%).

The social partners agree that the government's forecasts of economic growth may not correspond with the real development of business in Spain in 2002: the employers consider that growth will be positive, but not until late 2002, whereas the trade unions think that the slowdown in the economy may be greater than expected, even without counting the negative effects of the September 2001 terrorist attacks on the USA.

The social partners' basic disagreement with the draft budget relates to the government's intention to balance the state budget by using the surplus contributions of employers and workers to the social security and unemployment benefit system, which may reach ESP 500 billion in 2001, an amount which represents a third of the budget. CEOE considers that this is detrimental to business. The trade unions, in response to the government's announcement that it wishes to rationalise unemployment benefit, claim that the 2001 surplus derives mainly from social contributions to fund unemployment benefit, at a time when under 50% of unemployed persons are eligible to receive such benefit (ES9810183F).

However, the alternative proposals of the employers and the unions are quite different. CEOE considers that public expenditure should be reduced, especially that of the autonomous communities (regions). The trade unions call for: an increase in public expenditure, which is now 7.3 percentage points lower than the average percentage of GDP devoted to public expenditure in the EU; a greater effort in social protection (Spain's expenditure in this area is 7.1 points below the European average); an increase in unemployment insurance cover and unemployment benefit; and the establishment of inflation forecasts that are more in line with reality. Real inflation in 2000 was double the government forecasts, which was particularly damaging to public employees, whose are currently subject to a wage freeze (ES0102233F), and those workers who receive the national minimum wage (salario mínimo interprofesional, SMI), which is increased in line with inflation forecasts rather than real inflation.