Jobs of 270,000 on ERTE destroyed in Spain

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270,000 jobs for those on ERTE scheme gone forever. Image by Microbiz Mag via flickr under creative commons license

With a vaccination rate of more than 50%, an economy that is recovering and money from the European emergency fund that is becoming available, Spain seems to be heading in the right direction. However, the end of the crisis is not near for everyone on ERTE (temporary unemployment scheme).

According to estimates by Spanish think tank Funcas, 270,000 employees on the ERTE temporary unemployment scheme will not return to their original employer. In concrete terms, this would mean six out of ten employees still on ERTE have lost their job for good.

According to Funcas experts, this has a negative impact on the already existing gap between the labour market in Spain and that of the largest European Member States. To close this gap, Funcas is pushing for the necessary reforms that will lead to more stable employment in Spain. According to the think tank, this is only possible if the national debt is reduced.

Employment at old level only at the end of next year

The 40% who are likely to be able to return to work mainly work in the hospitality and recreation sector. In that sector the covid restrictions have largely been lifted. Taking into account job growth in the coming period, Spanish employment will not be back to pre-coronavirus levels until the end of 2022.

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From 3.6 million to 360,000 temporarily unemployed

Funcas’ employment recovery forecast is more pessimistic than the Spanish government’s, which is based on 170,000 lost jobs. While a large number, the ERTE work protection mechanism provided a solution for 3.6 million employees in April 2020. The Employment Minister said yesterday that of these 3.6 million temporary unemployed, only 360,000 are now on the scheme. 

Government debt down

According to Funcas, to ensure a stable labour market, the Spanish government must reduce the national debt. If it does not, it will have increased to 121% of GDP in 2027. It already increased from 95% to 120% GDP in the past year. Moreover, Spain then runs the risk the European Union will demand drastic fiscal reforms from Spain in the short term.

Other experts, including Professor of Applied Economics Santiago Lagos Peña, also underline the importance of reducing the national debt. This year, according to Lagos Peña, an effective and credible strategy must be put in place to bring it down. It needs to stay low so Spain is not structurally confronted with a sky-high debt, as was the case before the corona pandemic.

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