SPAIN REDUCES CIVIL SERVANT WAGE INCREASE

UNCLAS MADRID 003106 SIPDIS TREASURY FOR TRACI PHILLIPS E.O. 12958: N/A TAGS: ECON ELAB EFIN SP SUBJECT: SPAIN REDUCES CIVIL SERVANT WAGE INCREASE ¶1. SUMMARY. The Spanish press reported in late July that the new Socialist government is proposing a 3.2% increase in civil servant wages, rather than the 3.5% union goal, in the 2005 National Budget. This excludes the 0.3% allocated for the recovery of purchasing power lost in the last eight years. END SUMMARY. ¶2. The new Socialist government is proposing a 3.2% increase in civil servant wages in the 2005 National Budget. In late July, the GOS initial plan of 3.5%, proposed by the Ministry of Public Administration, was revised downwards by the Ministry of Economy and Finance. The 3.5% proposal consisted of 2% for predicted inflation, 0.5% for payroll increases to support the civil servant pension fund, 0.7% for productivity payments, and 0.3% for the recuperation of purchasing power lost in the last eight years. The 3.2% proposal omits the purchasing power share. ¶3. The civil servant wage increase would apply to 2.35 million public employees, with priority given to the police and Civil Guard to improve their labor conditions. ¶4. The Spanish press also reports that labor unions have rejected the 3.2% measure citing the importance of recuperating purchasing power. The unions quickly reminded the government that this plan was one of the electoral promises made by the Socialist Party, and they have called upon the government to initiate a process of negotiation to take place in September. ¶5. COMMENT. When the Minister of Economy and Finance, Pedro Solbes, was appointed, the Spanish business community was relieved, anticipating that he would be a forceful advocate of fiscal discipline. With this reduction in wage increases, his ministry has trumped the government's aspirations to quickly meet the demands of civil servants, indicating that Minister Solbes will continue to play budgetary watchdog on the government. Nevertheless, if the Socialist government stands by its proposal of 3.2%, it will not distinguish itself from the previous administration, which recently fixed wage increases between 3.2% and 3.3%. END COMMENT. MANZANARES