More pain in Spain

Not surprisingly but when it comes closer to home you also get worried.

I recently got informed that one of the largest insurance companies in the world will cut its work force by 30% in Spain.

I believe this is not unexpected but now advancing because of the recent labor law changes in Spain cutting the budget for firing people by 50%. Great government decision!

Instead of reforming the labor markets this kind of measurements are presents for corporate leaders that most likely will not be affected by a reorganization.

In a crisis changing the management is not seen as a good decision because you cannot blame them for what is caused by external factors. So, why firing people?

Someone very close to me working inside this French insurer updated me about the situation which looks to me a good example of how especially Spain is situated.

True, a reorganization cannot avoid firing people but who gets fired here in Spain? Not the top management in Madrid and not those related to the unions. First the teams outside Madrid, like in Barcelona and Bilbao.

Even those in Madrid who have to change jobs already are moved inside the firm while others outside Madrid are not getting the same treatment.

This is not new or shocking but it is negative in a country where many instead of contributing lack any vision or care. This country will not change soon.

The coming years bottoms will be reached and new elections probably change power but will Spain come out of the recession better? Will this insurer learn something?

I do not think so. Structural changes are needed while people have to be open for change. Well known intellectuals share solutions and comments but are ignored.

During the next years Spain will just survive thanks to the funding of the EU while selling assets at bargain prices to for example China.

When eventually the economic and industrial conditions allow it people will again be hired. The insurance company in this example needs those who got fired but most likely others take their place. Who wants to return where your value is zero?

Why do companies not take better care of human value? Why is saving now some better than saving a lot later? Or are new investments lower than former cost cuttings?

Many companies see stakeholder value as the priority. Even when saving 30% in salaries will not bring back net growth, better margins or market share.

On the contrary. Better positioned competitors definitely will benefit. To win back lost territory and clients major campaigns will be announced after this debacle.

Spain is not able to handle this kind of excesses while it is not positioned to avoid increasing unemployment. It will loose more competitiveness in the global markets as long as drastic changes are not taken.

Cutting 30% of your work force looks drastic but is not the best solution because 20% of these people will be needed again soon. Unless the firm decides to leave Spain but that seems unlikely after recently completing a large merger.

On top dis-investing will lead that the top management will walk away as assets are going to be sold. This is not the case in most (international) Spanish companies.

Finally lesser positioned or a longer recession will drive people away. A country with bad education, no first jobs available or missing an equalized housing market does not offer much of a future.

I wish all in Spain the best and hopefully my scenario is too pessimistic.