MNI: Spanish Unions, Business See Renewed Talks On Wages Pact

Stalled talks between Spanish unions and businesses for a pact to limit wage growth could resume after the summer when inflation is likely to ease, officials from major unions and a leading business group told MNI, noting that new wage awards are currently running at a higher level than would have been stipulated in an earlier proposed deal.

An agreement based on providing annual salary rises of about 3.5% until 2024 came close to being settled earlier this year, before the Spanish Confederation of Businesses (CEOE) rejected union proposals to include a variable component linked to inflation. But all parties, with encouragement from the government and the Bank of Spain, are keen to return to the negotiating table.

“If strikes or such problems become more normal, Spain could be seen as a problem country and receive less investment, that’s why we want to negotiate,” said Mariano Hoya of the UGT union.

New collective wage increases are coming in at above 4%, Hoya and the other union and business officials said. Overall Spanish wages are only growing at 2.4%, but this is because of a time-lag effect on collective agreements covering multi-year periods. Inflation slowed to 8.3% in April.

The CEOE will return to talks once it sees that inflation has begun to ease and that new contractual wage agreements are running at a higher rate than the unions were asking for, said Hoya, arguing that Spain needs to boost internal consumption, given that the key tourism sector will still lag 2019 levels this year.

“If we don’t raise wages, this country will suffer and that will be reflected in the GDP figures,” he said.

INDEXATION

The CEOE’s director for the Economy, Gregorio Izquierdo, agreed that it will be easier to negotiate once energy inflation eases in the second half of the year. But he insisted that an agreement could not include an automatic inflation-adjustment mechanism.

“We need to avoid returning to indexation even if new collective agreements are higher than the general framework that was being negotiated,” said Izquierdo, who also directs the IEE economic think tank.

“If we avoid indexation now, inflation will really be transitory, and we won’t lose competitiveness,” he said, adding that only 17% of Spanish wage contracts are currently indexed, down from 70% before the global financial crisis.

Higher wages would not trigger an inflationary wage-price spiral, said Mari Cruz Vicente, secretary for union policy and employment at the CCOO union, adding that businesses, which had to divert part of their 2021 profits towards paying off pandemic debt, have margin to pay more to workers.

Companies are already transferring the rising costs of supplies to consumers and second-round effects are feeding through to core inflation, Vicente said, calling for the resulting loss of workers’ purchasing power to be cushioned.