Spain calls for three-year austerity agreement

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The Independent Online
THE SPANISH cabinet has scheduled an emergency session for today to finalise details of a tough austerity plan under which workers and employers will be asked to make big sacrifices in a three-year 'social pact' to overcome the economic crisis.

The economy and finance minister, Pedro Solbes, will explain the plan, described as the most radical for more than 30 years, at an extraordinary session of the Congress of Deputies (lower house) tomorrow.

Government officials revealed yesterday that unions and employers would be asked to accept an across- the-board wage freeze next year, lower-than-inflation pay in 1995 and an inflation-linked rise the following year.

That goes for workers and executives alike in the public and private sectors. The officials estimated this would mean a 6 per cent loss of purchasing power over the three years. Inflation is running at just below 5 per cent.

Employers are being asked to promise not to cut staff, with an exemption for companies making losses. Those in profit are to pledge to reinvest profits in creating new jobs, although the plan does not make clear how this could be guaranteed. It does, however, specifically call for a freeze on dividend payments.