Spain boosts minimum wage as Covid revival gathers pace


Coronavirus economic impact updates

Socialist governments in Spain and Portugal are raising wages and stepping up social spending to ensure a “fair recovery” from recessions triggered by Covid-19 as EU funds begin to pour in and their economies revive.

Pedro Sánchez, Spain’s prime minister, announced an increase in the minimum wage on Wednesday, saying there would be “no economic recovery if it does not reach the pockets of all Spaniards in the form of more jobs, better wages and more dignified pensions”.

Earlier this week António Costa, his Portuguese counterpart, pledged a package of reforms ranging from measures to tackle youth unemployment to increased child tax benefits as well as investments in health and social security. “The best response to crises is solidarity, not austerity,” he said.

The announcements reflect increasing pressure from across the political spectrum over how to spend the tide of EU pandemic recovery funds beginning to reach the Iberian peninsula.

Both premiers head minority socialist governments and are in late-stage negotiations on next year’s budgets with radical leftwing parties, whose support they rely on to pass legislation.

Spain expects to receive €70bn in EU grants and a similar amount in loans over the 2021-2026 lifetime of the pandemic recovery plan. Portugal anticipates accessing €14bn in grants, but plans to accept only about €2.6bn in loans to help contain a public debt in excess of 130 per cent of national output.

Sánchez pledged an “immediate increase” in the €950 monthly minimum wage, which affects about 1.5m workers, although negotiations between the government and trade unions continue. Talks have focused on an increase of €12 to €19.

Podemos, the Madrid government’s radical leftwing coalition partner, has pressed for the increase after a sharp rise in energy prices pushed up inflation. Consumer prices rose 3.3 per cent in August, the biggest increase since 2012.

Nadia Calviño, economy minister, appears to have eased her resistance to the move as employment levels improved this summer.

Sánchez is moving forward with two other reforms of crucial importance to Podemos: an overhaul of labour legislation led by Yolanda Díaz, his communist labour minister, and a new housing package, the subject of tough negotiations over rent caps between the coalition partners.

The prime minister said he would unveil his 2022 budget plans within a few weeks, forecasting that the economy would return to its pre-pandemic level before the end of next year.

In Portugal, Costa is finalising his budget in talks with the anti-capitalist Left Bloc (BE) and the old-guard Communist party (PCP). Although not in a formal coalition, the two groups have helped keep Costa’s Socialist government in office since 2015 in return for legislative concessions.

The government has been negotiating a package of 48 social measures with unions and employers. But Catarina Martins, the BE leader, said Costa was offering “many measures but few solutions”.


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