Tensions in Spain's coalition government flare up over labour reform

Changes to the labour law are one of the reforms Brussels expects by the end of the year in exchange for Spain getting the full €140 billion ($162 billion) promised the country from the European Comission's massive coronavirus economic recovery programme.

The previous conservative government passed the reform in a bid to revive an economy which had been devastated by the 2008 global financial crisis. Among other things, it made it easier for companies to shed workers and cut wages.

Proponents argue it transformed Spain into a more competitive market and created jobs, while critics say it has made jobs more precarious in a country that already has the highest proportion of temporary workers in the European Union.

Prime Minister Pedro Sánchez's government has repeatedly vowed to unpick the labour reform by the end of the year.

But as the deadline nears, sniping over the crucial reform has increased between members of his Socialist party and those of his junior coalition partners, the far-left Podemos.

The two parties were set to have emergency talks over these tensions issue on Monday evening at the request of Podemos.

The government has threatened to revoke the most controversial elements of the reform, such as a shift to individual company deals regarding pay and work conditions from sector-wide collective bargaining agreements.

Labour Minister Yolanda Díaz, the most visible face of Podemos, has promised a "big revolution in the labour market".

Yolanda Díaz serves as the country's Labour Minister and is also one of Spain's Deputy Prime Ministers. Photo: PIERRE-PHILIPPE MARCOU / AFP

Socialist Economy Minister Nadia Calviño -- a former general director for budget at the European Commission -- is more reticent, refusing to talk of a "repeal" of the reform.

Business groups have in recent days expressed their concerns over Diaz's "Marxist" approach and supported Calvino, who is accused by Podemos of "intrusion" because she wants to take part in the talks over the labour changes.

Diaz was applauded over the weekend at a meeting of one of Spain's largest unions, Comisiones Obreras, when she vowed to carry out the reform of the labour law "despite all the resistance".

"There is a part of the government that does not want the model of labour relations to change, that wants to maintain the status quo," she added on Monday.

Antonio Barroso, an analyst at political consultancy Teneo, said the Socialist party "wants a more moderate reform, more in line with what Brussels wants."

But repealing the labour reform was one of the "star promises" of Podemos when it agreed to enter into a coalition government with the Socialists in 2020 and it fears that if it does not keep its word it will "pay a price at the ballot box", he added.

However, since conservative parties are currently leading in opinion polls "it is not in the interests of either party for the government to fall," Barroso said.

European Economic Commissioner Paolo Gentiloni said the "labour market has traditionally been a problem in Spain, with huge differences between workers who have more protections and those with less."

Government talks with labour and business groups over the reform can not go on indefinitely, he added during an interview published Sunday in daily El Pais.

"After a while the government must decide," said Gentiloni, currently on a visit to Spain.

Speaking at an economic forum in Madrid on Monday attended by Gentiloni, Sánchez said his "entire government" was behind the reform.

"This will be done in Spain as it is done in Europe: through social dialogue and consensus," he insisted.

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