Madrid plans to streamline public sector seem merely cosmetic

By Juan Pedro Marín Arrese, in Madrid | Spain’s government has pledged to close down 80 publicly owned enterprises, an impressive figure at face value. But most of the adjustment is grounded on the simple recipe of merging subsidiaries into mother companies. Thus the only tangible savings amount to allowances paid to suppressed Boards of Directors. A negligible €1 million cut off that will add very little in terms of budgetary balance. Further plans to trim down executives’ salaries in a sizeable way won’t change matters either.

The real problem public sector is confronted with is its massive overstaffing. State owned public TV, for instance, runs a service much similar to the one offered by private competitors employing at least four times manpower. And yet no plans are envisaged to overhaul this huge overmanning that is crippling any chance to redress an appalling productivity record. Much to the dismay of many observers, official policy seems to discard any lay-offs betting on a miracle to save the day.

The same pattern is to be found in general administration. Regional and local authorities have multiplied over the last years their staff leading to bounteous payroll levels the crisis has proved to be unsustainable. Central government slashed salaries by 5% in 2010, only to find out that overall personnel expenditure increased. Nobody seemed to be aware that half of that cost accounts for retired civil servants preserved from taking such a bitter medicine.

Will excess in manpower lying at the root of budgetary imbalance be curbed? Madrid has displayed up to now no inclination to follow that line. It has even promised to preserve both the size and pay in public employment.  Downsizing expenditure might therefore fail to match expectations. A most annoying prospect when you risk becoming a laggard in the race to budget balance.

* Juan Pedro Marín Arrese is an economist.