Gonzalez seeks pact to fight recession

FELIPE GONZALEZ, strictly speaking Spain's acting Prime Minister until parliament approves him later this week, yesterday set about his most difficult task since scraping through in last month's general elections.

His survival, everyone agrees, depends on finding a so-called Grand Social Pact, aimed at easing Spain out of its first recession since Mr Gonzalez took over in 1982, indeed since the later years of the dictator Francisco Franco.

King Juan Carlos last week designated Mr Gonzalez as the man most likely to form a new government, given that his Socialist party won more seats than anyone else in the elections, though short of the absolute majority it had enjoyed since 1982.

Since his election victory Mr Gonzalez has tried to rope in whomever he could to give him the necessary absolute majority to rush through the changes needed to take Spain out of its economic crisis. But his success has been limited. The two main power blocks he would need to rule have either played him at his own game - you show me your card, I'll show you mine - or abandoned him to his fate.

Yesterday, Mr Gonzalez called in the country's two main trade union leaders, Nicolas Redondo and Antonio Gutierrez, to discuss a pact that is seen as Spain's only way out of its deepening economic crisis.

Unexpected economic statistics recently showed that Spain had slipped from the growth it had come to expect over the past few decades to a 1.1 per cent negative growth in the first three months of this year.

After this morning's meeting with the union leaders, Mr Gonzalez said he intended to stick to the terms of a so-called Strike Law that he had agreed with the union bosses late last year. The legislation was left up in the air when Mr Gonzalez called snap elections in the spring. Essentially, the new law would give even greater rights to Spanish workers, already cushioned against anything that might befall workers in most other countries of the European Community.

Perhaps to get down to serious negotiations, Mr Gonzalez last night called in the head of the country's Employers' Confederation, Jose Maria Cuevas, who made no bones about his preference for a conservative government in the run-up to last month's election. Mr Cuevas and much of private industry are demanding a total rethink of Spain's economic policies, mainly a reform of labour laws to give bosses greater flexibility in hiring and firing.