Spanish government welcomes impact of leave program

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Spanish government says it refuted predictions of coronavirus surge unemployment, in an indication of the effectiveness of leave programs across Europe.

In an interview with the Financial Times, José Luis Escrivá, Minister of Social Security, said that the OECD and Bank of Spain unemployment forecasts of over 20% did not take into account the impact of the Spanish regimes, known as ERTE. , and had assumed that this would delay rather than prevent the mass layoffs.

“These predictions have completely failed,” said Escrivá. “The Bank of Spain’s forecast for the scenario that came to fruition – second and third waves of coronavirus – spoke of an unemployment rate of 22%. But we ended last year with an unemployment rate of 16% and it will be around that level this year as well. He added that the difference between 16 and 22 percent of the Spanish workforce was over 1 million workers.

Overall, the European labor market has been largely shielded from the fallout from the pandemic by leave plans for more than 40m of people.

While more than 5 million people in the United States have lost their jobs since the pandemic struck in February, unemployment has risen much less in the eurozone – increasing by less than 1.8 million during the same period and raising the bloc’s unemployment rate from 7.2% to 8.3%. percent.

Mr Escrivá argued that the impact of leave programs had been most notable in Spain, which has long had to contend with some of the highest unemployment rates in the euro area, with unemployment rates before the pandemic about 14%.

At their peak in April, the country’s ERTE programs covered some 3.6 million people – a figure that fell to 755,000 at the end of last year. So far, most of the people who left the plans have kept their old jobs.

In contrast, the number of people benefiting from the French leave program rose from 8.4 million in April to 1.8 million in October, but fell to 2.9 million in November after the country entered its second lockdown. of the coronavirus. Germany’s Kurzarbeit program peaked at nearly $ 6 million in April before falling to just under $ 2 million in October.

While Spanish rules prevent companies from laying people off for six months after participating in an ERTE coronavirus, the number of people covered by the end of July had already fallen by more than two-thirds from its peak, to around 1 million. This means that companies have not laid off their staff even though the government does not force them to do so.

“There has been virtually no structural destruction of jobs,” said Escrivá. He added that Spain would seek to keep ERTEs at the heart of its labor policy in the future, so that people can go through training programs rather than being made redundant. The current emergency program, which was originally scheduled to expire in June 2020, has now been extended until the end of May this year. Mr Escrivá said the cost was “significant but manageable” at around 5.5 billion euros for the latest four-month extension.

Analysts at the OECD and the Bank of Spain admit they underestimated the extent to which ERTEs would decouple unemployment rates from Spain’s fall in GDP in 2020, which the government says will decrease by more than 11%.

The OECD provide in June, unemployment for the last quarter of 2020 would reach between 22 and 25.5 percent and called soon after for governments around the world to start cutting leave programs.

But, in revised estimates last month, the organization put Spain’s unemployment rate at 17% for the fourth quarter of 2020, predicting it would stay roughly the same for 2021 as a whole.

Likewise, the Bank of Spain has also amended its unemployment forecast this year and next.

The Spanish economy still faces great challenges this year if jobs are to be preserved, with a significant gap between government forecasts of almost 10% growth and external forecasts. This week, the BBVA, the bank, estimated 2021 growth at 5.5%.

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