Gonzalez at risk as peseta plunges

RECORD jobless figures, coupled with speculation on a peseta devaluation, piled political and economic pressure on Spain's Socialist Prime Minister, Felipe Gonzalez, yesterday, threatening his fledgling minority government.

The conservative opposition spoke of the country's 'worst economic crisis in 30 years' and left and right called on Mr Gonzalez to address parliament and the nation on the gravity of the economic crisis.

The peseta, attacked by speculators earlier in the week, slithered further against the German mark yesterday afternoon as dealers expressed disappointment in the unchanged German discount rate.

From an opening 81.10 to the mark, up from this week's record low of 82.40, it closed in Madrid back around 82.40.

As always, the Bank of Spain declined to comment on whether it had intervened to prevent further slippage.

If it did, dealers noted, the continued slide did not augur well for the Spanish currency.

Although Mr Gonzalez is a strong believer in the European exchange rate mechanism and monetary union, he may be forced to heed increasing voices questioning Spain's continuing presence in the ERM given its unexpectedly deep economic crisis.

The other side of the double-edged sword for Mr Gonzalez was the publication of the mid-year jobless rate, a record 3,396,700 people, or 22.25 per cent of the workforce, according to the National Statistics Institute.

This means that 350,000 more people joined the dole queues between January and June, threatening a jobless rate of one in four by the end of the year.

Mr Gonzalez, who has kept a low profile in recent days, has made a so- called 'social pact for employment' his priority in an attempt to win the support of all social sectors.

But many politicians and economists believe that the crisis requires immediate, decisive action, social pact or no.

Even the Basque and Catalan nationalist parties, on whose parliamentary support Mr Gonzalez is banking throughout the next four years, yesterday attacked his apparent inaction.

The Catalan leader Jordi Pujol called on him to face the nation on prime time television to explain the crisis and warned that the Catalans could not support him in parliament unless he came up quickly with an effective economic policy to tackle the crisis.