Spaniards signing up to loss of spending power

The latest government figures show more Spaniards are signing up to a loss of spending power. Salaries agreed in collective agreements rose an average of 1.56 percent in July — below the year-on-year inflation rate forwarded by the National Statistics Institute (INE) of 2.2 percent.

The Labor and Social Security Ministry figures also indicate that the rise was lower in newly made agreements — where salaries rose by an average of 0.85 percent — than in revised agreements — where they grew an average of 1.66 percent.

The rise in salaries was also lower in sectoral agreements than in company-level deals — 1.54 percent compared with 1.74 percent. In both cases the figures were below the averages for June. It is the sixth consecutive month in which company- agreed salaries rose more than sectoral agreement ones.

ECB recommendation

The figures come after the European Central Bank (ECB) on Thursday recommended negotiating company agreements as a way of reducing salaries to drive down unemployment. Up until July, 1,209 agreements have been registered with the Labor Ministry affecting 381,900 companies.

July is the 18th consecutive month in which collectively agreed salaries have fallen. The average rise dropped below the year-on-year inflation rate in May.

The ECB on Thursday announced a battery of recommendations for the five euro-zone countries that are currently undergoing adjustment processes -- Cyprus, Greece, Ireland, Portugal and Spain -- aimed at bringing down their high levels of unemployment.

In its monthly bulletin, the lender proposed structural reforms that include a "reorientation of spending towards education and R&D;" greater labor reform, which would allow for the lowering of salaries yet further; measures that facilitate the creation of companies; and "boldness in the face of lobbying by privileged groups and vested interests."

The document draws attention to the "excessive profit margins" in "sheltered professions," particularly in the service sector, and says that it believes that costs can be further reduced in the five countries by "removing obstacles to (international) competition," in particular by freeing up markets and reducing red tape.

The ECB also recommends that the five countries "relax employment protection legislation," by "abolishing wage indexation schemes, lowering minimum wages and permitting wage bargaining at the firm level."