Spain's public sector sees above-inflation pay rises

A 3.5% increase in the pay bill for around two million workers has been agreed by unions and public sector employers in Spain.

This increase is just above the current level of inflation (which stood at 3.2% in September), and significantly above the forecast level of inflation for 2005 of 2.0%. It is also 0.3% higher than the initial proposal on pay made by the Spanish finance minister, Pedro Solbes.

Four elements go to make up the overall increase:

* 2.0% to cover forecast inflation;

* 0.7% increase in the extra payments that Spanish workers get on top of their normal monthly payments;

* 0.3% for restructuring in central government; and

* 0.5% in increased payments into the pension fund.

Further increases in public sector pay, and particularly in the extra payments, are promised for the future.

A commitment to above-inflation pay increases in the public sector, to make up the losses in real terms during the period of the previous centre-right government, was part of the electoral programme of Jose Luis Rodriguez Zapatero's socialist government.