A triumph for dialogue

The social pact against the crisis signed Wednesday by the government, labor and employers should be seen as a political success for Prime Minister Zapatero and the culmination of a laudable effort by the UGT and CCOO unions to foment a new negotiating strategy that will undoubtedly yield greater benefits for the country and themselves than the policy of confrontation that led to the sterile general strike of September 29.

This is the first broad social accord since 1985 and one that invites confidence that an agreement will also be reached in the area of collective bargaining, the aspect of labor reform that is still pending. The importance of the pact is manifest in a number of ways. The markets bore witness to the political will shown in reducing the risks to the financial system, driving down the risk premium to 180 basis points. It is no less significant that the unions have shown willingness to discuss some of the controversial aspects of collective bargaining, which before September 29 would have been taboo.

The undeniable success of the government was blotted by its inexcusable clumsiness in the invitations sent to the political parties to the signing ceremony. If you want the opposition Popular Party (PP) and the nationalist groups to back the accord, you have to make them feel they played an active role in achieving it. Instead, they were informed late and through cold and formal messages, as if they were undesirable guests.

The comparison with the Transition-era Moncloa Pacts trumpeted by the lovers of rhetoric is facile. The Moncloa Pacts constituted a grand social and political agreement that strengthened the hand of Adolfo Suárez's government in adopting drastic measures against inflation and the public and trade deficits. The new accord is more concrete. It establishes in detail the conditions under which workers can retire during the transition period for raising the pensionable age to 67 years from 65, and also aims to breathe some life into the moribund labor market.

Rather than the dismissive attitude adopted by the PP, a more reasonable stance would be for it to support the accord in Congress without putting too many obstacles in its way. It is essential to get the message across that exceptional policies are being introduced with the broadest political backing in order to pull the economy out of its slump and overcome the lack of confidence of international investors. This "reasonable stance" should also inspire the PP to reach an agreement with the government on limiting regional public deficits and the recapitalization of the savings banks. With pension reform out of the way, holders of Spanish debt will be paying even closer attention to the makeover of the financial sector and the public deficit.

The importance of the pact should not hide its patchiness. Its core aspect — pension reform — minimizes the risk of the system collapsing through to 2040. The incentives for companies to hire over 100,000 young people out of work are well intentioned but based on past experience of doubtful import. Some 131,000 people lost their jobs in January in what was further confirmation that the labor market has yet to touch bottom, and will only start to pick up when activity does.