The Advisory Council on Economic Affairs to the Catalan Government proposes to only have one type of labour contract

Barcelona (ACN).- The Advisory Council of Economic Reactivation and Growth issued its 49 page report today with its findings and recommendations on how best to boost the Catalan economy. The Advisory Council is made up of academic experts and members of the business community appointed by the Catalan Government, which is currently run by the Centre-Right Catalan Nationalist Coalition, Convergència i Unió (CiU). The Advisory Council is chaired by Abertis President Salvador Alemany and it met for the first time on  February 11^th last. On that occasion the Catalan President, Artur Mas, asked the Council to compile the report presented today. This document will be the basis for discussion for the ‘economic summit’ the Catalan Government is organising for Friday March 25^th. The Catalan Government, parliamentary political parties, and social and economic agents, together with the members of the Advisory Council will participate in this summit. This meeting has to define a strategic roadmap on how to boost the Catalan economy. The Advisory Council’s document identifies four main challenges, which need to be overcome: the high rate of unemployment, problems in funding the private and public sectors, increasing productivity, and dealing with a general confidence crisis. To deal with these challenges and enhance the recovery of the economy, the Advisory Council has proposed several changes. Some are of noteworthy importance.

The Catalan labour market, much like the Spanish, has very strict employee protection laws for those with fix-term contracts and on the other hand workers with temporary contracts have little protection. Also included in the latter are people on other contracts. In addition, unprotected workers represent a large percentage of young adults. In times of employment readjustment, such as those seen during an economic crisis, unprotected workers are the first ones to be laid off. Add to that a volatile unemployment rate that overreacts during economic difficulties. All of these factors combined have contributed to the 18% general unemployment rate in Catalonia and the 40% unemployment rate among young adults. A solution is needed. The Advisory Council has proposed merging all contracts into one; creating only one type of contract in order to break the current duality of the labour market. This would lead to a reduction for employers in the costs associated with laying off workers, being just below the European average. Finally, collective agreements should be “decentralised” to the maximum level, in order to avoid “wage rigidity”.

Referring to the problems of funding the public and the private sector, the Advisory Council has stressed that the Catalan public sector in underfunded. Catalonia must receive higher revenues from the Spanish State, as currently it suffers from an “excessive fiscal deficit”. The Advisory Council emphasises the importance and the need to maintain regional solidarity, but it also underlines that currently Catalonia pays too much and does not receive enough, which makes its citizens poorer and its public services underfunded. In fact, Catalonia’s fiscal deficit (the difference between the monies Catalonia gives and what it gets back) has been estimated (depending on the formula used) between 9% and 12% of its annual GDP. The Advisory Council also proposes introducing new taxes to partially pay for non-basic public services (such as “Justice, Healthcare and Universities”). On funding the private sector, the expert group recommends creating new ways for companies to receive funds apart from bank loans. They point at risk capital and business angel tools, among other possibilities. They also mention the current restructuring of the financial sector, which is deemed necessary. The banking system should shift from real state credit to business credit.

A third priority is to increase productivity. Regards the private sector, it will be increased with a combination of many factors. Two elements of the plan are especially important: better infrastructure and better training. When it comes to the public sector, the Council stresses inefficiency, which needs to be tackled with a “profound restructuring” of the public sector. The number of staff needs to be reduced, with the exception of those employees providing direct public services. This will come with a restructuring of the administrative structures and a simplification of administrative procedures. For instance, the red-tape required to start a new business will be completely reviewed and shortened. The Advisory Council also mentions the possibility of not having any more permanent contracts for public employees and align their wages to productivity.

Finally, the expert group concludes that Catalan society suffers from a crisis of trust in its political and economic system; in other words, citizens see a negative future ahead. The Council makes recommendations to tackle this issue. It advises that the public sector increase internal audits and make staff selection and promotion procedures more transparent. When referring to the private sector, it emphasises the importance for innovation regards wages and internationalisation. It asks companies to increase their capital, via external capitalisation operations or by re-investing profits. In addition, the expert group advises some indications on how best to boost the entrepreneurial spirit.