These are the main economic measures of the recovery plan that Spain has sent to Europe

The Government of Sánchez has sent to Brussels his plan to be able to spend 140,000 million euros from the EU coronavirus recovery fund. And it is that the money was not free, it never was, it comes in exchange for reforms.

We would receive 70,000 million euros of subsidies that Madrid plans to take advantage of between 2021 and 2023, the government intends to obtain an equivalent amount of loans, in very advantageous conditions, between 2024 and 2026.

The government has been criticized for the lack of clarity on the plan’s three most sensitive reforms, which affect pensions, the labor market and the country’s fiscal balance. Therefore, we will explain what is Sánchez promising to Europe.

Labor market: the focus on simplification and flexibility

It is no surprise to anyone to say that the Spanish labor market stands out for its high inefficiency and duality, since there are deep imbalances that aggravate business cycles and they end up weighing down productivity increases. All of this has led to high structural and youth unemployment.

Spain has a rate of temporary employment much higher than the average for EU countries, a high prevalence of involuntary part-time work, and a very high turnover of contracts of very short duration. All these factors lead to the precariousness of the labor market, and Spain stands out in 2020 with a temporality of 24%.

For this reason, the simplicity of the contractual modalities of our labor market is requested, first of all. In order to reduce the temporality, it is necessary to simplify the types of contracts, reducing them to three (stable, temporary and training / internships), generalize indefinite hiring and return to the temporary contract the causality that corresponds to the limited duration.

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On the other hand, it is committed to flexibility but without those temporary contracts: “the reform must guarantee that companies can adapt quickly to changes in the economic context, with alternative mechanisms to the high temporality and the chaining of contracts of very short duration”. That flexibility would come from the hand of promote the use of the fixed-discontinuous contract for cyclical and seasonal activities and reinforce the control of part-time hiring, especially with regard to irregular working hours and additional hours.

In times of crisis, this flexibility would provide internal flexibility to companies and stability in employment in the face of temporary downturns in business activity, with a special focus on training workers. Consisting of reduction of working hours or suspension of the contract due to business crisis, would allow reinforcing investment in worker training during periods of low activity, minimizing recourse to dismissal, safeguarding the worker’s contractual relationship with the company.

And, in order to cover the financing of benefits and the compensation of social security contributions, in line with the model of other European countries, a tripartite Fund will be created, the operation of which will be agreed through social dialogue.

Active employment policies have been a real fiasco in Spain, and to this, between 6,100 and 6,500 million euros are allocated to Active Employment Policies and, in addition, the SEPE only places 2% of the wage earners. To try to solve this problem, it will seek to identify the most effective programs, services and itineraries to make an efficient allocation of public resources.

It is suggested to incorporate incentives aimed at meeting objectives in the allocation of resources in the Sector Conference and in the remuneration of those responsible for guiding and training job seekers. It proposes designing a strategy that involves local agents, since the local dimension in Spain is limited. He proposes to incorporate the National Employment System (SNE) to improve access to data, increase its quality and adapt the technological architecture.

Subsidies and bonuses for hiring account for around 25% of total spending on active labor market policies. It does not serve much and, hence, incentives and requirements for beneficiary companies will be simplified, improve training programs and ensure greater coordination between all administrations.

As announced, the cost of dismissal is not attacked, one of the historical problems for our labor market. Spain stands out for being one of the developed countries with a significantly higher firing cost than the average for OECD countries, which makes full flexibility in labor dynamics difficult.

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To pay … Taxes arrive

Under the euphemism “modernization of the Spanish tax system that allows it to adapt it to the international trends on taxation of the 21st century”, it will be sought that the average taxpayer pays more and the Government already knows how.

First, “green” will be the perfect excuse for the Spanish middle classes to pay more taxes. They tell us that we must adapt our tax system to internalize environmental externalities. And, from there, we would go to promote the use of less polluting energy. Review the taxation of the air sector to act on the emissions of these sectors.

In other words, punish diesel and pay a premium for air travel. In fact, the government sought that rise to 34.5 cents from 30.7 cents per liter, a measure that did not prosper to be integrated into the PGE2021. And in the aviation sector, a study by the Alternativas Foundation, close to the PSOE, calculated an additional cost of 4.47 euros for short-distance trips, 23.22 euros for medium-distance and 41.99 euros for long-range journeys the objective? Raise 1,300 million euros.

There are a wide variety of regional taxes on waste and a national strategy is being sought to avoid “waste tourism”. Hence the tax on the deposit of waste in landfill and on incineration, the tax on non-reusable plastic containers and a modification of the Tax on Fluorinated Greenhouse Gases

On the other hand, the roads are supported by all Spaniards through the PGE What if only those who use them pay? That would be the new approach: establishing a payment system for the use of the road network by the end of 2023 or early 2024.

Payment Roads Map Spain

In addition they are being studied until thirteen tax benefits selected by the working group for their quantitative and qualitative importance that will be carried out throughout the period 2021 to 2023. The tax benefits of pension plans have already been modified in personal income tax, and the reduced VAT rate for soft drinks, juices and sodas with added sugars or sweeteners. Let’s go to more …

It is estimated that an important part of the spending policies are implemented through tax benefits. Together they represent an amount close to 60,000 million euros (5 points of GDP) and cover a wide spectrum of policies related to the promotion of employment, the provision of social services, the complement of pensions, etc.

From now on, in the first quarter of 2022, 2023 and 2024, the corresponding report and the conclusions of the analysis of the tax benefits analyzed in the previous year will be presented and, where appropriate, the reform decisions will be taken.

Pensions: Influencing the Toledo Pact

Pensions is the issue that has been the most stuck in the Spanish reality in recent years. We have used up the Social Security Reserve Fund and now pension spending is fed by Budgets and not only of Social Contributions, which demonstrates the insosibility of the system, with a high influence of long-term demographic factors.

Would look for a assumption from the State of expenditure items that are currently paid through contributions by limiting the capacity of the system to cope with the volume of pension spending.

In addition, it is pursued the approximation of the effective retirement age to the legally established age. Now we have the progressive increase of the ordinary retirement age from 65 to 67 years in 2027 (currently it is 65 years and 10 months). This 2011 reform is already showing results as the real retirement age has gone from 63.8 years in 2010 to 64.1 in 2017, accelerating to 64.6 in 2020. The reducing coefficients for voluntary early retirement would be modified , to encourage permanence in employment and eliminate regressive elements.

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From an income point of view, the self-employed to pay. 85% of the group do so for the minimum base, of the rest, less than 9% do so for bases that do not exceed 1,964.70 euros. The contribution of self-employed workers according to the real income derived from the development of their activity would be the key factor to condition the contributions.


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