Mish's Global Economic Trend Analysis

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Spain's Two Largest Unions Call for General Strike; Mood of the Nation Posted: 10 Mar 2012 12:57 PM PST The Spanish economy is deteriorating rapidly, and a general strike will not help matter any. Nonetheless, strikes, and I am willing to bet increasing violence, will soon befall Spain. Please consider Spain's new government faces first strike Spain's two largest unions, Comisiones Obreras and UGT, voted on Friday to call for a general strike on March 29 against reforms they called "the most regressive in the history of Spanish democracy". The labour reforms of Mariano Rajoy's government grant employers greater flexibility to pay lower compensation when they fire workers, a change Mr Rajoy argues is crucial to increase Spain's economic competitiveness, but one that has enraged the country's unions. Spain is struggling with more than 5m people, a fifth of its workforce, unemployed. The government argues that strong support from employers for the labour reforms demonstrate that it is taking the right steps to tackle joblessness. The previous general strike in Spain, called in September 2010 against the Socialist government of José Luis Rodríguez Zapatero for raising the national retirement age, saw 7.5 per cent of all state workers walk out, according to the then government. "There is no precedent for a decision this brutal, that puts us on an unknown road without considering the consequences," said Cándido Méndez, head of the UGT union. "It is a general strike both just and necessary." Work Rule Changes Desperately Needed The irony in this sad mess is that work rule changes and pension reform are desperately needed. However, with Spanish unemployment at 23.3% and youth unemployment at 49%, few are going to see it that way. Making far matters worse, the balance sheet problems of Spanish banks and debt problems in Spanish regional governments are both dramatically understated. There is no way Spain can meet the EU demanded 4.4% deficit target, or even Rajoy's higher target of 5.8%. For more on the problems confronting Spain, please see Sharpen the Mower: Spain Needs Triple the Budget Cuts and Tax Hikes to Meet EMU Imposed Budget Targets   Spain Kicks Off the Year Destroying 9,000+ Jobs a Day, 283,700 for Month; Impossible Dream Bond Yields Still Show Stress The Spanish 10-year bond yield is down from a peak near 6.7% to 5%, but that is a steep premium to a 10-year German bond yield of 1.79%. The 2-year government bond yields of Spain and Germany are 2.33% vs. 0.16% respectively. Mood of the Nation My friend Bran who lives in Spain writes "Here we have a general strike announced for the 29th, and the political sniping and arguments are going on as usual. I expect some initial protests this week. The sad situation is an unusual confrontation of ethics and abilities that is hard to describe. The strike on the 29th will show the mood of the nation - for now not obvious how it will be." Indeed. And it will be the mood of the nation (over time, not just on the 29th), not the mood of bureaucrats in the EMU and IMF, that decides the ultimate fate of Spain. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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