The slowdown that the Spanish economy had in the second half of 2022 was primed by private employment, a key indicator to test the expectations that businessmen have about the behavior of the activity in the short and medium term. According to the last two editions of the Active Population Survey, this lost a total of 76,500 employed people from July to December, mainly due to the ‘puncture’ of the final stretch of the year when, according to the INE, employers had seen their confidence in relation to summer The national GDP came from growing just 0.1% between July and September despite the pull of tourism, which at that time was closer to recovering pre-covid levels.
They were months in which they began to fear that Spain would enter a slight technical recession that, at least for the moment, international organizations or the Bank of Spain had ruled out. Months of uncertainty, with inflation at maximums (it reached a ceiling in July at 10.8%) that contributed to exacerbate the discomfort of businessmen in relation to some decisions with which the Government has sought to distribute the costs of the inflationary crisis, such as the temporary taxes on banking and energy or the solidarity tax on large fortunes.
The snapshot with which the labor market faces the new year is marked by a fall in employment of 81,900 people in the last quarter and by an increase in unemployment of 43,800 until once again exceeding the barrier of 3 million unemployed at closing The exercise. Employment has endured almost stoically the last blows of the pandemic, the increase in production costs due to the increase in the cost of energy, raw materials and transport; the lack of visibility for the future, higher financing costs with the fastest rate rise since the creation of the euro (250 basis points in half a year) and the first signs of weakening in household consumption.
Ministers of Podemos and businessmen… face to face
In the middle of an election year, the most obvious confrontations between the ‘purple’ bloc of the coalition government and the businessmen, when the employment situation has weakened so much in recent months, only add fuel to the fire. The allegations made by the Minister of Social Rights and leader of Podemos, Ione Belarra, to large distributors such as Mercadona or Carrefour for “filling their pockets” with food prices (coinciding with the drop in VAT on these products approved by the Executive ) have been the last example, but not the only one.
The agreement with EH Bildu for the control of collective dismissals by the Labor Inspectorate or the increase in the Minimum Interprofessional Wage for which the vice president Yolanda Díaz, closest to the thesis of the unions, has also heated the atmosphere with the employer. The First Vice President and Minister of Economic Affairs, Nadia Calviño, came up against both controversies this week, insisting that the statements must be “lowered down in general” and also emphasizing that the increases in the SMI must be compatible with job creation.
However, the deterioration of relations is already a fact. Even before these two episodes, the CEOE even stood up and ruled out sitting down again at the negotiating table to continue tackling key reforms such as the second part of the pensions, which in principle is expected to be approved before the end of the month so that it can enter into force retroactively from January 1 (as would happen with the rise of the SMI). The businessmen seem unwilling to offer more signs of understanding with the Executive – at least in the face of the gallery – and they practically consider the talks broken, in a position that sources close to the Government fear that it responds to a preconceived strategy.
Elections and pending economic challenges
Clashes with businessmen and a battery of elections on the horizon (municipal and regional elections are held in May and general elections at the end of the year) do not go well with a year in which Spain will have to face the challenge of attracting international investors in order to supply sovereign debt purchases that until now had been carried out by the ECB. So far this is not being a problem. On Wednesday, the Treasury raised 13,000 million in a 10-year bond with a coupon of 3.15%, the highest since 2014, with a demand that came to exceed 86,000 million, the second highest in history.
We will have to see what happens from March, when the ECB becomes a net seller of debt and begins to get rid of the liabilities it accumulates in its balance. The banks, with which the tension has also been evident in recent months, should occupy an important part of this gap left by the issuer. A more agile awarding process for the bulk of the Next Generation funds, the possible arrival in the country of new projects from large companies less negative than expected, if price tensions ease and the economy holds up despite the expected drop in activity For some of the Eurozone partners, they can give the Government some oxygen for the coming months.