A necessary extension

The issue of whether or not to prolong the 400-euro subsidy paid to unemployed people who have exhausted their insurance has become a crossfire of accusations that cloud any rational debate on the matter. It is not true that this subsidy “is supporting the unemployed of Zapatero” as the Popular Party’s congressional spokesman Alfonso Alonso put it on Thursday.

The PP ought to tone down its propensity to gratuitous invective, because the previous government, though open to criticism, did not generate the financial crisis or the collapse of the property bubble, nor the global recession. On the contrary, the present government and the party that sustains it ought to concentrate on explaining what are the pros and cons of maintaining the subsidy, so that citizens can understand whatever decision is made.

In budgetary terms, against the background of an ever-more intense fiscal adjustment, it seems obvious that we are looking at an important outlay, of some 500 million euros. In questions of public expenditure there are always options. The subsidy might be maintained as a trade-off for the rationalization of spending in other areas. The political problem stems from the fact that the government has opted for indiscriminate cutbacks, without explaining in any case why some budget headings are being suppressed, others cut back and the rest maintained. There is no apparent criterion of socio-economic profitability in the austerity moves made so far, so that it is not possible to analyze whether the adjustments made are those that had to be made, or are merely arbitrary decisions.

In favor of the maintenance of the 400 euros there are two arguments of considerable weight. On the one hand, be the subsidy large or small, the fact is that it constitutes an incentive, if a minimal one, to consumption; and its elimination would have some impact, if small, on the already attenuated demand. On the other, in many households this money makes the difference between a modest income and the absence of stable resources, that is, poverty. Recent events in Écija show the social disintegration this may lead to. It is likely that the risk of impoverishment is rising due to pending reductions in private and public employment and the effects of cutbacks in unemployment insurance.

Everything seems to indicate that the government will maintain the subsidy, though with modifications; this, at least, is the desire of the Labor Ministry. But the decision in is the hands of the Finance Ministry and, in the last instance, of the prime minister, Mariano Rajoy. One of the few clear points in this debate is that the subsidy system must be reformed, because Zapatero’s Plan Prepara was conceived as a temporary income previous to re-employment, which it has not turned out to be. As Alfonso Alonso says, the objective must be recovery of employment, but it is up to the PP and the government’s economic team to explain how they plan to do this.