Spain PM vows to reform rigid labour market rules

3rd December 2009, Comments 0 comments

The proposed changes which may be modelled after the Germany scheme will include allowing firms to cut costs by reducing their hours instead of making them redundant.

Madrid – Spanish Prime Minister Jose Luis Rodriguez Zapatero vowed Wednesday to reform to the nation's rigid labour market rules to fight a rising unemployment rate that is already the highest in the eurozone.

He said the proposed changes, which include allowing firms to cut costs by shortening workers' hours but without making them redundant as Germany has done, would be discussed between unions and employers during the first half of next year.

"I think the overhaul of our (economic) growth model requires reforms in all areas of the economy, also in labour relations," Zapatero told parliament.

Under the "short-time working" scheme that Germany’s cabinet extended for a year last month, the state pays up to 67 percent of the salary of a worker whose hours have been reduced for a period of up to two years.

In November, Spanish Economy Minister Elena Salgado said her socialist government would study the Germany model as a possible example to follow in its bid to transform Spain's labour market.

"This is a formula that is not used much which we should discuss," she said at the time when asked if Spain would be willing to adopt the German scheme.

Among the other measures proposed by Zapatero was the introduction of more flexibility for collective wage bargaining and the improvement of job placement services.

Earlier Wednesday the labour ministry announced that the number of people claiming jobless benefits in Spain rose by 60,593, or 1.6 percent, in November, the fourth monthly increase running, to reach 3,868,946.

Spain provides only quarterly data on the unemployment rate but according to the European Union statistics agency Eurostat it stood at 19.3 percent in October, the second highest rate in the 27-nation bloc behind Latvia.

The unemployment rate across the 16 nations that use the euro single currency stood at 9.8 percent in October, while in Germany, the region's biggest economy, the jobless rate fell to 7.5 percent from 7.6 percent in September, according to the agency.

Spain's main business federation argues the government needs to lower the cost of firing workers in order to encourage companies to hire and boost the economy but Zapatero has repeatedly refused to take any steps to reduce workers' rights.

"I firmly believe our commitment should be to strengthen our companies without harming workers," he said Wednesday.

The high cost of firing workers leads Spanish companies to rely heavily on temporary staff, who have far fewer benefits and rights than those on permanent contracts.

During the third quarter more than 25 percent of Spanish workers had a temporary contract compared to 14 percent in 2008 in the entire 27-nation EU according to Eurostat.

"In this country, the burden of the crisis has fallen disproportionately on temporary workers," European Central Bank President Jean-Claude Trichet told a conference in Madrid last week.

"Compensation for those employed on a permanent basis has seen only minor adjustments. Looking into the future, wage flexibility will need to be made more widespread," he added.

Spain's gross domestic product contracted 0.3 percent in the third quarter, its fifth straight quarterly decline, even as the entire eurozone officially joined the United States and Japan in emerging from recession during the same period.

Europe's fifth-biggest economy has proved especially vulnerable to the global credit crunch because growth relied heavily on credit-fuelled domestic demand and a property boom boosted by easy access to loans that has collapsed.

AFP / Expatica

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