The figures on falling employment and rising unemployment in Spain in recent quarters dramatically illustrate how our labour market accentuates the contraction in employment in downturns and acts as the main factor amplifying recessions. As you all know, this is Spain's most negative distinguishing feature relative to other advanced countries. Decidedly, we cannot put off adopting, as soon as possible, reforms to staunch the ongoing rate of dismissals and to promote to the full new hires. It is vital to reform those labour market arrangements whereby the main means for the adjustment of Spanish firms continues to be labour shedding. Here, the current collective bargaining system plays a key role. As it stands, it prevents working and wage conditions from adjusting in a sufficiently differentiated manner to the different labour and productive environments that companies and productive sectors face. The adverse effects of our particular collective bargaining system are not so visible in periods of strong growth, although then, too, they hamper increases in productivity. But in today's circumstances, where the crisis impacts companies and productive sectors very unevenly, such effects mean that the adjustment operates by unnecessarily forcing out a large number of workers from the market. Therefore, at least during the crisis, collective bargaining agreements should be applied flexibly to allow employers and workers to reach temporary agreements within individual companies so that, in these exceptional circumstances, working conditions can be adjusted in exchange for maintaining employment levels or softening reductions. Recent days have seen some agreements along these lines.

In this respect, the legislation recently approved by the Council of Ministers initiating transposition should smooth access to services activities; prior authorisation will no longer be needed, administrative procedures will be notably simplified and certain obstacles to free movement of services will be eliminated. 4  BIS Review 43/2009  Nonetheless, the success of the reform, in terms of greater liberalisation of services, will depend on its proper application to key sectors, such as professional services and retail trade, and on the strict limitation of legally permitted opt-outs. Top of the to-do list is a matter concerning the main source of wealth of any country: the human capital of its citizens. It is well known that the level of educational attainment of the Spanish labour force increased notably during the second half of the past century. But it is also a fact that convergence in educational terms with our European partners has slowed in recent years, which will bear most adversely on the economy’s productivity. Many facets of our education system need changing, but the overriding priority is to extend and improve the quality of secondary education, an area where regional governments admittedly have an essential role to play. The system for continuous training throughout employees’ working lives must also work properly. Here, the delay in the labour market reform not only has adverse effects on employment but also discourages investment in human capital by workers themselves and by companies, which negatively impacts productivity.