Spain’s Sanchez Unlocks EU Funds With Tense Parliament Vote Win

(Bloomberg) -- Spanish Prime Minister Pedro Sanchez scraped together just enough support in a disputed vote in parliament to pass a labor reform that's key to unlock billions of euros in European pandemic aid.

Deputies approved the legislation last night by a razor-thin margin of 175 votes to 174 amid scenes of confusion after the parliament speaker initially announced it had been defeated. She then corrected the tally amid cheers from the government bench.

Adding to the drama, the main opposition People's Party then claimed one of its lawmakers had mistakenly cast a vote in favor of the reform and demanded the result be annulled.

That marked the difference between success and failure for Sanchez who had to rely on a medley of smaller groups, including center-right Ciudadanos, to give him the numbers he needed after some regional parties which normally back him voted against the reform.

The controversial vote highlighted the political obstacles the government has faced in tapping 140 billion euros ($160 billion) of European Union funds set aside to help Spain repair its pandemic-hit economy. The fact that Sanchez won with the support of Ciudadanos will likely raise tensions with his coalition partner Podemos, a far-left party that had warned that such an outcome could inflict damage on his parliamentary coalition.

Labor Minister Yolanda Diaz, who led the labor overhaul aimed at limiting short-term job contracts, failed to convince Catalan separatist party Esquerra Republicana and other forces that customarily vote in line with the minority government to back the legislation. The vote result deals a potential setback to the Podemos leader who has emerged as a likely challenger to Sanchez in the general elections scheduled for 2023.

Regional Powers

Esquerra and the Basque Nationalists were among groups that joined the People's Party in voting against the reform. They had claimed the law would wrest powers away from their regions.

Passage of the reform was crucial for Sanchez who needs the EU funds to inject momentum into a slower-than-expected recovery as he prepares for re-election.

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Sanchez had approved the reform by decree in December after months of tense negotiations with unions and business lobbies before taking the legislation back to parliament.

Initially, he had pledged to repeal a previous law brought in by his conservative predecessor Mariano Rajoy in 2012 that sought to boost employment by making it cheaper for companies to fire workers.

Instead, Sanchez opted for a partial rewrite of that reform to focus on reducing the use of temporary contracts. Employer groups say the legislation still preserves leeway if companies need to cut headcount.

Spain has one of the highest rates of temporary employment in Europe with nearly a quarter of its workers employed under short-term contracts, according to Eurostat.