Spain extends furlough scheme until end of January 2021

Spain’s government on Tuesday, September 29, reached an agreement with union bosses and employers to extend its coronavirus furlough scheme until the end of January, despite the impact on public finances. 

The ERTE furlough scheme was launched in April in a bid to avoid massive layoffs at firms hit by the lockdown and had been due to end on September 30.

It is the second time the scheme has been extended, with some 750,000 people currently benefiting from furlough conditions, down from a peak of 3.4 million at the height of the lockdown. 

“The ERTE scheme can continue being an alternative to layoffs,” tweeted Unai Sordo, secretary general of the Workers’ Commissions (CCOO) union, hailing the agreement. 

A commitment to fund such temporary unemployment schemes was one of the key measures put in place by Socialist Prime Minister Pedro Sanchez’s government to bolster an economy battered by months of lockdown. 

Earlier this month, Sanchez said the government had spent 4 billion euros ($4.7 billion) per month on the ERTE scheme. In return, companies are banned from laying off staff for 6 months after the scheme ends. 

“The ban on layoffs remains in place,” Labor Minister Yolanda Diaz told a press conference, saying the new deal was “key to finding a way out of the crisis.”

“It is a day of hope for the companies and the workers in our country.”

Talks with employers went down to the wire over differences about the criteria for choosing firms eligible for the scheme, with some fearing they would be excluded, notably in the hotel sector. 

Spain’s main business lobby group, the CEOE, said the deal reached would “guarantee the survival of the largest possible number of companies and jobs at such a prolonged and difficult economic juncture.”

The government has also extended its financial support to the self-employed. 

The cost of emergency measures to bolster the economy such as the furlough scheme, state-backed credits, and help for the self-employed, is equivalent to 20% of gross domestic product, the government has said.  

The pandemic destroyed more than a million jobs in Spain between April and June, mostly in the services and tourism sector. 

Spain’s unemployment rate jumped to 15.3% by the end of June, and could rise as high as 19% by the year’s end, the government has warned, while the International Monetary Fund sees it rising to 20.8%.

The country is currently battling a second wave of the coronavirus that has so far claimed more than 31,000 lives and infected nearly 750,000 in the highest infection rate in the European Union. – Rappler.com