Cuts in payment to civil servants will make the economy suffer at Xmas

Hypermarket and department store associations have joined small to medium sized business groups in the Balearics, including Pimeco and Afedeco in saying that the pay cut is going to have a negative effect on consumer spending and they expect all their retail sectors to suffer as a result.

Stopping the extra pay this year for civil servants has saved the Balearic government around 109 million euros (an average of 1'200 per head), but the business associations are saying that the loss will be a double one because it means that the double salary won't now benefit shops and businesses.

The extra pay, Pimeco and Afedeco said, has in the past largely been spent on Christmas purchases and presents whilst the extra salary in summer has usually gone on leisure and holiday trips.

Antoni Riera of the CRE went so far as to say yesterday that the negative effect is in fact a “triple” as opposed to a “double whammy” because as well as purchases not being made, those who have had their extra pay docked will now not be spending in bars, restaurants and other complementary services. “It's all bad news for the Balearic economy, Riera said. Pimeco and Afedeco said that the extra pay which government workers used to receive twice a year had a galvanising effect on the economy as the chain of spending and consumption is progressive. Now that the “perk” has been eliminated, said the associations, those who used to receive it will be suffering from insecurity over finance, will lack confidence when it comes to shopping, and this will impact negatively on small to medium-sized business associations. “All the spending that civil servants used to do at Christmas will now go up in smoke and smaller companies will suffer as a result,” agreed Riera.
ANGED, the large business association said that their Christmas trade will be seriously affected. The extra pay, representatives said, was an important factor in hypermarket and department store income and turnover in the holiday period. The toy sector which generally does very well at Christmas is going to have its income restricted, ANGED predicted. “People aren't going to go out and enjoy themselves if they are worried about where the next cent is coming from,” ANGED said, referring to how restaurants and other leisure industries are going to fare.

Pimeco's President, Bernat Coll forecast that trade is going to be down around 10 percent for the smaller businesses, and that is going to make what has already been a very difficult economic situation for the sector since the beginning of the year even worse.