Cablegate: Spain Reduces Civil Servant Wage Increase

This record is a partial extract of the original cable. The full text of the original cable is not available.

131511Z Aug 04

UNCLAS MADRID 003106

SIPDIS

TREASURY FOR TRACI PHILLIPS

E.O. 12958: N/A
TAGS: ECON ELAB EFIN SP
SUBJECT: SPAIN REDUCES CIVIL SERVANT WAGE INCREASE

1. SUMMARY. The Spanish press reported in late July that the
new Socialist government is proposing a 3.2% increase in
civil servant wages, rather than the 3.5% union goal, in the
2005 National Budget. This excludes the 0.3% allocated for
the recovery of purchasing power lost in the last eight
years. END SUMMARY.

2. The new Socialist government is proposing a 3.2% increase
in civil servant wages in the 2005 National Budget. In late
July, the GOS initial plan of 3.5%, proposed by the Ministry
of Public Administration, was revised downwards by the
Ministry of Economy and Finance. The 3.5% proposal consisted
of 2% for predicted inflation, 0.5% for payroll increases to
support the civil servant pension fund, 0.7% for productivity
payments, and 0.3% for the recuperation of purchasing power
lost in the last eight years. The 3.2% proposal omits the
purchasing power share.

3. The civil servant wage increase would apply to 2.35
million public employees, with priority given to the police
and Civil Guard to improve their labor conditions.

4. The Spanish press also reports that labor unions have
rejected the 3.2% measure citing the importance of
recuperating purchasing power. The unions quickly reminded
the government that this plan was one of the electoral
promises made by the Socialist Party, and they have called
upon the government to initiate a process of negotiation to
take place in September.

5. COMMENT. When the Minister of Economy and Finance, Pedro
Solbes, was appointed, the Spanish business community was
relieved, anticipating that he would be a forceful advocate
of fiscal discipline. With this reduction in wage increases,
his ministry has trumped the government's aspirations to
quickly meet the demands of civil servants, indicating that
Minister Solbes will continue to play budgetary watchdog on
the government. Nevertheless, if the Socialist government
stands by its proposal of 3.2%, it will not distinguish
itself from the previous administration, which recently fixed
wage increases between 3.2% and 3.3%. END COMMENT.
MANZANARES

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