Widespread strikes have not seriouslydisrupted Spain's economy and wage restrictions are likely to
continue as policy makers call for more austerity to help the
country compete in the European Community (EC), foreign bankers
and analysts said.
    "The strikes were unexpected and in some cases spectacular,
but they have had little effect on basic economic life," a U.S.
Banker told Reuters. "The socialists can apply restrictive
measures as long as the unions remain relatively weak."
    The communist-led Workers' Commissions recently rejected a
call by its leadership for a general strike while the ruling
Socialist Party's trade union arm, the General Workers' Union,
has refused to demonstrate with the communists on May 1.
    The government's chief concern is inflation, which stood at
8.3 pct last year. The high inflation rate is especially
damaging in view of Spain's trade balance with Europe, which
turned into a deficit last year after entry to the EC.
    Officials say the situation is rapidly deteriorating. The
deficit of 450 mln dlrs in the first two months of 1987 was
only slightly below the 515 mln dlr deficit for all of 1986.
    The government has tightened up money supply, called for
maximum 5.0 pct wage increases -- the same as this year's
inflation target -- and is pursuing a program of industrial
restructuring despite an unemployment rate of 21.5 pct.
    Bankers say tight-money policies have attracted an
avalanche of foreign capital that is cashing in on the strong
peseta and high interest rates and those funds, converted into
pesetas, are swelling money supply still further.
    Bank of Spain governor Mariano Rubio said last week that
money supply is expected to rise 14.3 pct in the first quarter
compared with this year's eight pct target.
    Most analysts agree that the government will have to accept
inflation closer to six pct this year but they say there is
little cause for alarm.
    "The money supply should be back on track by the summer and
we will begin to see lower interest rates," said Andres
Trujillo, general manager of Hong Kong and Shanghai Banking
Corp's Madrid branch.
    He told Reuters the labour protests, despite occasional
outbursts of violence, are not having a serious impact on
foreign investment.
    "Spain is a big and relatively underdeveloped market," he
said. "It is still easier to compete from here than in other
countries and this sporadic unrest is not likely to scare off
investors."
    Juan Jose Macaya, general manager of Investban SA, a
portfolio management company, said he expects monetary
objectives to be under control in two or three months.
    "There has been some nervousness in the stock exchange but
we see this as a short-term reaction," he said.
 REUTER
