Via Financial Times

The Spanish government has agreed to extend the country’s emergency paid leave schemes for an additional three months to the end of September — a costly measure that business and unions say is essential to prevent the widespread collapse of companies and job destruction.

The temporary schemes, known as ERTEs, had been due to expire on June 30 and currently cover more than 2m people who hope to return to their jobs as the crisis eases but who are far from sure of doing so. 

At their peak, the ERTEs provided payments to almost 3.5m people of up to 70 per cent of their normal salary. One of the most pressing questions about the Spanish economy is what proportion of the beneficiaries will be able to resume their previous employment when the schemes eventually expire. 

On Thursday, after more than a week of negotiations, Yolanda Díaz, labour minister, agreed on the three-month extension with business organisations and unions, which had called for more generous measures than the government had previously offered.

Some sectors, notably the tourism industry which fears losing more than half its receipts this year, have asked for the schemes to continue to the end of the year.

The crisis, or force majeure schemes, differ from previously existing ERTEs in providing exemptions for social security payments made by companies.

These exemptions represent a considerable part of the bill to the state, costing the government about €6bn, compared with around €15bn for the transfers to workers. But many companies argue that, at a time of near-zero income, an obligation to make social security payments as normal would spell financial ruin.

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 The exemptions were at the heart of the dispute in recent days between the government, on one hand, and business and unions, on the other. The final deal continues exemptions but at a declining rate.

“The agreement that we struck today for the extension of the ERTEs is a guarantee of certainty and stability for workers and businesses,” Ms Díaz wrote on Twitter. “An agreement that is up to the level required by the country.”

The Confederation of Employers and Industries of Spain, which represents 2m companies and negotiated the deal with Ms Díaz, said the final deal was an improvement on the government’s initial offer. 

However, in an indication that it would be pushing for at least some of the schemes to be continued until the end of the year, it added that “we will keep working so that in September we can address how we deal with the final quarter of the year”.

The agreement is set to be formally approved by the Spanish cabinet on Friday and subsequently issued as a decree.