The ERTE job-protection scheme deployed to combat the effects of the pandemic has left Spain well-prepared to face its aftermath.

The Covid-19 pandemic has left states around the world facing the greatest health threat in over a century. More than 15 million people have contracted the disease worldwide and more than 600,000 are known to have perished as a result. Although Europe seems to have overcome the ravages of the first wave, the economic earthquake haunting its economies has only just begun to rumble.

As the protracted European Council meeting this month indicated, the European Union has struggled to agree a robust and ambitious recovery package. But member states had already begun to roll out macroeconomic policies, predicated on the clear premise of not repeating the mistakes of the aftermath of the financial crisis.

Anti-cyclical measures

The social-democrat government in Spain, led by Pedro Sánchez, has decisively assumed the task of sustaining its economy on life support. A series of anti-cyclical measures, costing €300 billion in all, aim to safeguard the viability of business, the employment of millions of Spaniards and the supply of essential goods for a population constrained by the virus. 

The 2008 crisis exposed the deficiencies of a labour market burdened by chronic unemployment, which was already at 17 per cent before the outbreak of the pandemic. Successive governments, in line with the prescriptions dictated by the neoliberal consensus and its institutional representatives, opted to increase the productivity of the Spanish economy through wage devaluation, loss of union rights and an excessive boost to temporary contracts as enshrined in the 2012 labour-market reform. What was presented as a circumstantial policy to face the economic crisis has now become the foundation of an unsustainable, unjust system which must be fixed.

The Great Lockdown has opened a window of opportunity for the Sánchez government to demonstrate that an alternative economic agenda is emerging strongly—that the state not only can but has an obligation to prevent mass layoffs and generate security and confidence in times of enormous uncertainty. The pandemic not only compels governments to provide roads to recovery but also obliges European states to create new avenues for structural transformation. 

Inspired by the German tradition of Kurzarbeit (short-time working), the Sánchez government has situated its short-term layoff scheme, the ERTE (expediente de regulación temporal de empleo) programme, at the centre of its response to the economic crisis. Faced with a near-total halt in activity, the scheme has enabled the state to protect millions of jobs whose destruction would otherwise have swelled the concerning unemployment figures. Incurring an overall cost of €17 billion in direct transfers plus €6 billion in foregone social-security payments, the state’s treasury assumes the payment of 70 per cent of the employee’s salary and exonerates employers from paying the social-insurance costs associated with the hired workers.

At the peak of the pandemic, the ERTE programme protected over 3 million workers—over one sixth of Spain’s workforce—and half a million enterprises of all sizes. In no month between 2008 and 2013 had the number of workers thus protected exceeded 60,000. Back then, under a conservative, Partido Popular, government, the political response to recession rested entirely on mass redundancies and enterprise closures. The current government is not willing to repeat that mistake. 

Increasing polarisation

In a political climate characterised by increasing polarisation, the labour department headed by Yolanda Díaz—the first communist to occupy a ministerial position in Spain’s recent history—has managed to anchor its policy action within the framework of social dialogue, securing the support of the trade unions and employers’ organisations. Those businesses with furloughed workers have agreed not to lay off the relevant workers for six months after resuming ordinary economic activity. Furthermore, the scheme excludes those companies headquartered in tax havens and it bans the distribution of dividends to large companies receiving public support.

Now that Spain seems to be heading towards a normalisation of economic activity, recent figures suggest the scheme has been a success. Half of the furloughed workers have already rejoined their businesses’ payrolls. Indeed, despite the accentuated short-termism of Spain’s labour market, for the first time in its recent history employment figures are plummeting at a far lower rate than the contraction of gross domestic product. The ERTE programme is likely to be extended at least until the end of this year, which shows the government’s decisive commitment incrementally to consolidate a robust safety net for Spain’s working families.

While this short-term response to the pandemic needs to be accompanied by far-reaching economic reforms, the expansion of the ERTE programme signals Spain’s return to the European mainstream of job protection and the recovery of an agenda of social justice in the Iberian country, under the left-wing coalition government of the Spanish Socialist Workers’ Party (PSOE) and Unidas Podemos. Across the aisle, the government is faced with a radicalised right-wing opposition, willing to destabilise the cabinet at almost all costs.

Structural change

Sánchez’s executive should not shy away from carrying through the democratic mandate it obtained in the 2019 election. A social majority is waiting for structural change and, indeed, the government has a unique opportunity to direct the country’s political agenda towards a new future of social justice, ecological transformation and an attack on grotesque levels of inequality.

As the English poet John Donne affirmed, no man (or woman) is an island entire of itself. The pandemic has brought to the fore a rediscovered sense of community, an unquestionable desire to situate the preservation of life at the centre of political action and a legitimisation of the state as a primary actor in the organisation of public life.

This paradigm shift opens a pathway to move beyond mere defence of existing social rights and to press decisively forward in the name of a more ambitious social agenda, taking advantage of the momentum created by the breakdown of neoliberal hegemony. All progressives should welcome Spain’s fight for a just recovery, as living proof of an alternative politics that can no longer be obstructed.