Spain in shock as recession hits Seat

THE RAIN in Spain fell mainly in Barcelona yesterday, leaving streets under several feet of water, but gloom spread across the nation. It was the first day that la crisis, the economic recession, truly hit home.

Fears for the future of the German-owned car manufacturer Seat, once Spain's pride and joy, cast a shadow over a nation whose jobless rate is edging towards one in four workers. Nowhere was the gloom worse than in Barcelona, where the carmaker's oldest factory employs 10,500 people and where the rains symbolically submerged many of last year's Olympic installations.

The Seat crisis, which followed the resignation on Wednesday of the company's chairman, Juan Antonio Diaz Alvarez, and rumours that Seat could be closed down by the parent company, Volkswagen, threatens the Barcelona workers and a similar number employed in two other factories, as well as thousands of related jobs.

It was the symbolism that knocked the stuffing out of many Spaniards. Seat, once state-controlled, was the embodiment of the economic expansion of Franco's later years. With Fiat of Italy holding a minority stake, it used to turn out Fiat lookalikes.

When the company was bought out by VW in 1985, Spaniards were told it was a symbol of European co-operation and Seat began producing such models as the Toledo, vaunted last year as the 'official car' of the Olympic Games. Yesterday, Ferdinand Piech, VW's chief, was quoted as saying Seat was to cope alone with expected losses this year of around pounds 500m.

There was speculation that VW's controversial Basque purchasing chief, Jose Ignacio Lopez, accused by General Motors of running off with their secrets and widely known as 'Superlopez', would be appointed to rescue Seat.

The Seat crisis overshadowed the appearance before parliament yesterday of the Economy Minister, Pedro Solbes, to present the government's austere 1994 budget proposals. No one was quite sure whether Mr Solbes was wasting his time as he posed for photographers with the 60 volumes of documents. Felipe Gonzalez's minority Socialist Party government will need the support of 17 non-Socialist deputies for the budget to be passed. The Catalan leader, Jordi Pujol, whose Convergencia i Unio (CiU) coalition holds 17 seats and never lets Mr Gonzalez forget it, has characteristically refused to pledge them. He is pushing for Catalonia's right to keep 15 per cent of its own income tax revenue, all of which goes to Madrid.

The Basque Country's lehendakari (regional prime minister) warned yesterday that his Basque Nationalist Party too would be seeking amendments to the budget before pledging their five parliamentary votes.

Few doubt that Mr Gonzalez will find the votes, even if he has to attract stragglers from as far away as the Canary Islands, but an approved budget will not guarantee him social stability or even political survival.