☰

M. Continuo

Factbox: Chronology of Spain crisis and reforms


    MADRID (Reuters) - Spain was slow to react to the impact of the economic crisis but has stepped up efforts to introduce reforms since late 2010 in a bid to assuage market fears it could follow Greece and Ireland and seek an international bailout.

    Here is a chronology of the reform and austerity measures undertaken by Spain.

    MAY 2009 - FIRST PHASE OF FINANCIAL SECTOR REFORMS

    The bursting of the housing market bubble hit financial institutions hard, particularly the smaller unlisted savings banks known as 'cajas'.

    In May 2009 the government urged the weaker cajas to merge to improve their solvency and avoid central bank intervention, as then happened with small bank CajaSur which was taken over by the central bank in May 2010. In June, the central bank created a 99 billion Fund for Orderly Bank Restructuring (FROB) to help banks' financing needs.

    MAY 2010 - AUSTERITY MEASURES

    As market pressure grew, Prime Minister Jose Luis Rodriguez Zapatero was forced to take measures aimed at cutting the country's swollen public deficit.

    The measures included cutting civil servants' wages by an average 5 percent, cutting some welfare benefits including the 2,500 euro cheque for each baby born, and freezing pension increases.

    The austerity measures only just scrapped through parliament, and were condemned by opposition parties.

    A day later the government announced a 7.7 percent cut in public spending of percent in 2011, which was increased to 7.9 percent in the budget.

    The measures led to calls for the September 29 general strike.

    JUNE-SEPTEMBER 2010 - Labor REFORM

    The government announced a labor reform in June 2010 that, among other measures, makes it easier for struggling companies to hire and fire staff.

    The law was passed by parliament in September and was beefed up to include rules which reduce how much firms have to pay for legitimally releasing a worker.

    JULY 2010 - PLANS TO ALLOW SAVINGS BANKS ACCESS TO PRIVATE CAPITAL

    The economy ministry announced plans to allow troubled savings banks access to private investors for the first time, to complement ongoing restructuring and merger processes.

    Valued-added tax was raised to 18 percent from 16 percent.

    SEPTEMBER 2010 - BUDGET FOR 2011

    The budget confirmed spending cuts of 7.9 percent for 2011, cut ministerial spending, increased tax on the rich, reduced regional spending.

    DECEMBER 2010 - IMPROVED TRANSPARENCY OVER BANKS, AUTONOMOUS REGIONS. SALE OF AIRPORT, LOTTERY STAKES.

    Amid rising market tension about the health of peripheral euro zone economies, the Bank of Spain acted to force banks to increase transparency, strengthen their balance sheets and speed up any merger processes already underway.

    The government also announced measures to improve the transparency of the financial accounts of Spain's 17 regions, which make up around half of public spending. They would from now on report their accounts on a quarterly basis rather than once a year.

    The government decided too to raise tax on tobacco, cut windpower subsisidies, and sell stakes in its airport authority and state lottery.

    JAN. 28, 2011 - PENSION REFORM

    The government reached agreement over a pension reform after months of negotiations with unions and business groups.

    The reform will see the retirement age rise to 67 from 65.

    Although not an urgent reform, it was welcomed by markets as a further sign the government is acting to stabilize a fractured economy.

    JANUARY-FEBRUARY 2011 - SECOND PHASE OF FINANCIAL SECTOR RESTRUCTURING

    The economy ministry announced a second phase of reform at the start of the year to clear up doubts over the health of the financial system, particularly the weaker cajas. New rules on core capital levels would have to be met or banks may face part-nationalization.

    The law was approved on February 18, and gave the cajas more time to become listed entities.

    FEB. 18 - FURTHER Labor REFORM MEASURES

    The government unveiled measures to help the unemployed back into work, particularly youth workers and those out of work for long periods. Youth unemployment in Spain stands above 40 percent.

    EXPECTED IN MARCH - REFORM OF COLLECTIVE BARGAINING SYSTEM

    Spain's collective bargaining process, whereby unions negotiate wages for entire industrial sectors rather than on a company by company basis, is seen as a key reason behind the country's lack of economic competitiveness.

    The government is due to unveil new measures, which would form part of its labor reform passed in 2010, in March after tough negotiations with business groups and unions.

    (Reporting by Feliciano Tisera; writing Nigel Davies; Editing by Susan Fenton)