- Tuesday, 17 July 2012
- Written by Darrall Cozens
Yesterday the media reported that one of the cuts introduced by the Rajoy government in Spain was the abolition of the Christmas bonus for civil servants. The reports give the impression that civil servants in Spain have enjoyed privileges not available to other workers and therefore they are an easy target for cuts.
What is the reality? All workers in Spain as elsewhere negotiate an annual contract with an annual salary. In Britain the annual salary is divided by 12 to produce a monthly income. In Spain the annual salary is divided by 14 with 1/14th paid each month except for July and December. In these months 2/14ths are paid which gives the impression that the payments are extra and above the normal monthly salary.
The system has been more beneficial to Spanish governments as by paying 1/14th each month the government actually saves a small part of the pay that it can get interest on. Indirectly, it also benefits workers as it is a type of enforced savings to enable workers to get extra money for the summer holidays and at Xmas.
A similar system exists in Italy and Greece, as well as Germany.
The cutting of the Christmas "bonus" means in effect a cut of 1/14th of the annual salary or just over a 7% cut. In addition to the drastic effect that this will have on the standards of living of working class people, the economic effects of such a reduction on effective demand in the economy is another nail in the coffin of economic growth as Spain enters its third year of recession.