And what has become obvious, given the present scale of public spending derived from the deterioration in employment, is that the viability of any credible budgetary consolidation strategy in the Spanish economy depends on swift and far-reaching changes to the trends currently prevailing in the labour market. Without a significant reduction in unemployment it will be very difficult to reverse the course of public spending and ensure a sustained recovery in the tax authorities’ capacity to raise revenue. The downturn in employment and the rise in unemployment are the most serious problem facing the Spanish economy, and that most hampering the recovery and fiscal consolidation. Unavoidably, then, reforms to labour institutions must be promptly undertaken that draw our unemployment rate closer to that of the more developed countries, thus checking flows to unemployment and enabling workers who have lost their jobs to return as soon as possible to an active working life. The reforms should encompass a wide range of institutions. Innovation in hiring arrangements is needed to provide for maximum job creation. We must rectify the pronounced segmentation currently characterising a labour market with a high temporary employment ratio, with most adverse consequences for job stability and for efficiency and fairness in the economy. In turn, collective bargaining needs reforming. This is so as to allow wage settlements to be tailored to a greater extent to each company and to the business cycle, but also to equip companies with the necessary flexibility to increase productivity and wages wherever possible.
In parallel, the illusion of progress may unquestionably have led us to be somewhat naive in failing to properly assess the potential adverse consequences that globalisation and, above all, the rapid parallel process of technical change may have had for certain segments of the population, and for free-market structures and institutions. Rising inequality within countries, including the developed economies, has dented citizens’ confidence in the ability of the political and economic system to respond to their yearning for generational improvement. That is contributing to reconsideration of certain key elements behind the functioning of our open societies. Thus, a second lesson to be drawn from globalisation is that we should design instruments and policies aimed at increasing opportunities for all and ensuring that the defining features of our societies, such as individual and collective progress, are strengthened. a. Strengthening and re-designing multilateral institutions Because I am firmly convinced that the globalisation of economic relations goes hand-inhand with enhanced overall well-being, I consider it a priority to strengthen the workings of multilateral institutions and, in particular, of the WTO. Here, too, we should acknowledge that, when assessing the capacity of the WTO to absorb changes, we have perhaps underestimated the risks associated with the – at times rushed – opening up of certain emerging economies, especially China’s entry on the international stage.