Spain’s economic woes are triggering renewed fears over a potential default in the euro area, and much of the blame belongs to labor laws that date back to the dictatorship of General Francisco Franco. Unless the government succeeds in changing them, it’s hard to see the country returning to healthy growth even if it manages to stay solvent.
Spain is by now notorious for having the highest unemployment rate in the European Union, especially among the young -- every second Spaniard under the age of 25 is looking for a job. It would be simplistic, of course, to attribute Spain’s severe economic contraction and rampant unemployment to any one cause, but the labor market is a useful place to start. It has taken the financial crisis to force an ambitious attempt to address the problem.
Franco’s camp introduced the foundations of the existing labor laws in 1938, when the Spanish Civil War was still being fought. The new legislation was heavily influenced by Mussolini’s 1927 Carta del Lavoro, and was bolstered by additions in the 1940s and ’60s and, toward the end of Franco’s rule, in the ’70s. Remarkably, much of that legislation remains in effect today.