After Harmony, Spanish Government's Ties To Business Hit Discordant Note

The relationship between Spain's left-wing government and the business sector has deteriorated sharply this year and mutual attacks are getting increasingly personal.

As the COVID-19 pandemic wrought havoc on Spain's economy after the Socialist-led government took power, the two sides cooperated in a constructive way. But things began to sour as the pandemic receded and a cost-of-living crisis took over the agenda, sources said.

With elections expected in the last quarter of 2023, the likelihood is that the new antipathy will not go away as the Socialists play to their base.

"It's the card the Socialists have pulled out as part of their electoral strategy," said Manuel Arias Maldonado, a professor in political science at the University of Malaga.

When Ferrovial last month announced plans to move its legal headquarters from Spain to the Netherlands, it provoked an angry attack by Prime Minister Pedro Sanchez on the engineering firm's Chief Executive Officer Rafael del Pino.

Some businessmen serve their country, but "after this announcement I believe that this is not the case of Mr. Del Pino," Sanchez said.

Such personal attacks on Spain's captains of industry are becoming a frequent feature of the government, according to business sources.

The Socialists' coalition partner, the far-left Unidos Podemos, which was born out of anti-austerity protests after the last financial crisis more than a decade ago, was always going to be hostile to business. But late last year, the Socialists began joining in on the attacks.

Sanchez's office declined to comment when asked by Reuters about the situation.

But Del Pino is not the only businessman to feel the brunt of government ire. Juan Roig, CEO of Mercadona, Spain's largest supermarket chain, was accused of profiting from the cost-of-living crisis by Social Rights Minister Ione Belarra.

"In Spain, there's no longer anyone who can't be called out - not even Mr. Juan Roig," Belarra said in January.

In response, Roig told a news conference last week: "Everyone has an opinion and I respect that, even if I don't share it.

"I feel very proud of my actions, of how at Mercadona we treat the customer, the worker, the supplier, society and, of course, the capital," he said.

Energy Minister Teresa Ribera has had a running battle with Iberdrola Executive Chairman Ignacio Sanchez Galan. She said comments by Galan that Spaniards who opted for regulated energy bills were "idiots" had caused "deep embarrassment" in her.

"I don't think it's very smart for a businessman to call his customers idiots, especially in circumstances such as these," she said.

When Galan said he opposed Spain's proposal to change its energy market pricing mechanism, she accused him of only defending Iberdrola shareholders' interests.

The government said there has been no change in the relationship, pointing out that there have been 13 agreements signed with the business sector and unions, one as recently as last month on healthcare for the workforce.

"In the midst of such an intense relationship there are moments of greater proximity and of less understanding,"

the Labour Ministry said in a statement.

But policies such as unilaterally raising the minimumwage, introducing a wealth tax and proposing a gender balance requirement in company boards have antagonised the private sector.

LOW EXPECTATIONS

Arias Maldonado said that when Sanchez brokered a deal with Podemos to form a government back in 2019, expectations for collaboration with the private sector were low.

Many were surprised that cooperation was initially fruitful after the government took office in January 2020. During the pandemic, banks worked hand-in-hand with the government to distribute state-backed 107 billion euros ($113 billion) of credit lines to shore up businesses and families.

After banks helped out workers by bringing forward employee's payments on furlough schemes, Labour Minister Yolanda Diaz singled them out for praise."The only thing I can say about the banks - in my own name and in the Spanish government's - is thank you," Diaz said in parliament. "They have pitched in."

Zara-owner Inditex, the world's largest fashion retailer by sales, was lauded for using its distribution channels to import masks and respirators from Asia.

Analysts place much of the initial productiveness on a cordial relationship between Antonio Garamendi, head of the Spanish Confederation of Business Confederations (CEOE), and Diaz, a member of Spain's Communist Party and Unidos Podemos.

They knew each other before rising to their current positions and communicate often, according to a source close to the minister.Good relations reached a peak with an agreement to overhaul the labour law. CEOE and the government met weekly to hammer out changes, demonstrating how a left-wing coalition could do business with the business sector.The deterioration in relations was "probably a regression to the mean," said Victor Lapuente, a professor at the University of Gothenburg. "What was abnormal was the extraordinarily good relations between, for instance, a minister who came from the Communist Party, and the leader of the CEOE."

With the onset of inflation caused by the Russian invasion of Ukraine, Spain's businessmen were told they should "pitch in".

They were caught unawares when the government announced plans for windfall tax on bank and large energy companies' revenues in July, saying it needed to help people with inflationary pressures.A senior banker, who did not want to be identified, said things took a turn for the worse when the levy was proposed without consulting the financial sector first.

"This was clearly a turning point and the relationship has since then clearly deteriorated between the sector and the government which acted quite arrogantly back then," he said.