It’s going badly with the businesses of Spain and the government of the country — only when they have to work together on a one-off occasion.
The price is an epic one: € 140 billion of grants and loans granted by the EU Corona Virus Recovery Fund over six years – and possibly more importantly associated reforms required by Brussels in areas such as government funding, pensions and labor rules. On both the spending and reform front, co-operation between business and government is a must.
But the tension is high. Many businesses, especially in the severely affected hospitality sector, are appalled by a recent decision to increase the minimum wage – albeit by only € 15 a month – while struggling to recover from the pandemic.
Then there is the government of the socialist government € 3 billion raid on the alleged profits of energy companies, part of the Spanish response to rising electricity and gas prices.
Shares in two of the largest sectors of the Spanish sector – Endesa, the Enel subsidiary and the more multinational Iberdrola – have fallen about 10 percent since the government’s announcement just over two weeks ago.
And yet, despite such fractures, business cooperation with the government is more important than ever – because of Spain’s highly polarized policies.
Consensus between left and right is sorely lacking – in contrast to Italy, the other major beneficiary of EU resources, which has set up a national unity government to spend the money and steer through reforms.
With little prospect of agreements crossing the Spanish political spectrum, business has become an even more important negotiator on the government’s EU plans. The moment of truth is fast approaching.
In areas such as pension reform and the labor market – all important parts of the recovery plan – Brussels is awaiting tripartite agreements between the government, employers and trade unions, and has demanded results this year.
Figures such as Ana Botín, executive chair of the Santander group, called for public-private partnerships on the recovery plan “for the welfare of our society”.
The government also wants private-public consortia to be able to utilize a significant portion of Spain’s recycling funds. But only one – which will include Seat, the Volkswagen subsidiary, Iberdrola and other people such as Telefónica and CaixaBank for the development of electric cars – have so far been approved by ministers. It has yet to be finalized.
Antonio Garamendi, head of the CEOs, Spain’s employers’ federation, to which more than 2 million businesses belong, is the biggest responsibility for managing Spain’s government business relationship.
He has taken a delicate middle ground and reached agreements with the government on important issues such as Spain flow chart, which was extended this week. None of this was easy for Garamendi or its members, many of whom share the right’s suspicion about the coalition of Pedro Sánchez, which includes communist ministers and often depends on the voice of Catalan separatist members.
The energy grip especially increased tension at an important time.
While the government say the levy will be used to reduce consumers’ bills, together with € 1.4 billion in tax cuts, the companies concerned are protesting, jeopardizing plans for major green investments. They add that the lucrative profits the government claims the sector makes do not even exist, as a large portion of its sales are on the futures market and do not reflect current sky-high prices.
Iñigo Fernández de Mesa, vice-president of the CEOs, argues that the government’s decision may disrupt the longer-term contracts that make up 90 percent of the Spanish electricity market, jeopardizing industrial users.
He says his organization needs to give its opinion on issues like these and others like pensions and labor market rules – or indeed the recovery fund.
However, the company will have to choose its battle, just as it looking for a share of the recovery fund spoiled. How much should they endure, for example, on labor reform – an agreement that does not disengage previous changes that made it easier to hire or fire, or an agreement that makes Spain’s infamous dysfunctional labor market, perhaps the biggest problem in the country, more flexible?
Businesses should also weigh how much responsibility they should take to help pensions more sustainable? What should be the contribution to the country’s tax debate?
Given the failures of the Spanish political system, the position of the enterprise in such fundamental debates is crucial. The consequences of his decisions can resonate over decades.