Spanish PM says falling wages help save jobs, overcome economic crisis

Prime Minister Mariano Rajoy said on Monday, Dec 9, 2013, that falling wages had allowed Spain, which is grappling with an unemployment rate of nearly 26 per cent, save jobs. -- FILE PHOTO: AP
Prime Minister Mariano Rajoy said on Monday, Dec 9, 2013, that falling wages had allowed Spain, which is grappling with an unemployment rate of nearly 26 per cent, save jobs. -- FILE PHOTO: AP

MADRID (AFP) - Prime Minister Mariano Rajoy said on Monday that falling wages had allowed Spain, which is grappling with an unemployment rate of nearly 26 per cent, save jobs.

Lower wages were "one of the keys" to overcome the economic crisis, he said in an interview with several European newspapers including Spain's left-leaning El Pais daily.

"In difficult situations, it is better to bet on earning a little bit less and maintain as many jobs as possible," Rajoy said.

"The latest jobless figures can't satisfy anyone, but they show us that there can be hope".

The number of people registered as unemployed in Spain fell slightly to 4.8 million in November. It was the first drop in registered unemployment in the month of November - traditionally a difficult month - since the figures were first compiled in their current form in 1996.

After the destruction of millions of jobs since a decade-long property bubble imploded in 2008, the news fed growing optimism that the worst may be over for the eurozone's fourth-largest economy.

In the third quarter, Spain emerged from recession with 0.1-per cent growth but still posted an official unemployment rate of 25.98 per cent, which is calculated in a separate, quarterly household survey.

Rajoy's conservative government has passed reforms that make it easier for companies suffering a downturn to fire workers, reduce severance pay and prevent unions from being able to cling to wage deals made during the boom.

"A more flexible economy allows alternatives to dismissing workers, and that has allowed the unemployment situation to stabilise," Rajoy said.

Unions oppose the changes, saying they undermine workers' rights and increase joblessness.

Rajoy said another forthcoming reform will allow for greater use of part-time contracts but vowed not to scrap the minimum wage.

The International Monetary Fund has warned that Spain faces five more years with unemployment rates topping 25 per cent unless it enacts yet more reforms including measures to help firms slash wages instead of axing staff.

Average household income has fallen by 9.5 per cent between 2008 and 2012, according to national statistics agency INE.

Salaries dropped by 12 per cent between 2010 and 2012, according to a study by think tank Fedea.