Spain needs pain for better future: Zapatero

1st September 2010, Comments 0 comments

Spain's Prime Minister Jose Luis Rodriguez Zapatero said Wednesday his nation needed to accept temporary pain for a better economic future, but said Spanish workers were unwilling to be flexible.

"All countries make sacrifices today for a better tomorrow," he told a press conference in Tokyo when asked how he will sell unpopular reform policies to his country, which is mired in soaring unemployment.

A general strike has been called for September 29 after Zapatero's government said it would press ahead with labour market reforms that would make it easier to hire and fire workers.

"Even if a general strike takes place on September 29, I will continue dialogue with the labour union the following day," Zapatero said through an interpreter.

The general strike will be Spain's first since 2002.

Zapatero, who became prime minister six years ago, noted work hours had been slashed in both Germany and Spain in the past but German unions had agreed to pay cuts.

"Spain was unable to achieve the flexible reform and change that were possible in Germany," he said

The International Monetary Fund (IMF) and the government argue the reform would help reduce Spain's unemployment rate, which sits at around 20 percent.

They also point out that it would reduce government spending on jobless benefits. But unions object to seeing workers' rights weakened.

They are also unhappy with government plans to raise the retirement age to 67 from 65 and austerity measures that will cut civil servants' wages.

Zapatero, who is in Japan until Thursday to promote economic ties, said the Spanish economy was recovering from a severe recession faster than other European Union countries.

"We do not need assistance from the EU or IMF and we have never thought it will be necessary," he said. Given confidence in the Spanish banking system, he said there was no need to inject more public funds into banks.

All eight major Spanish banks, including Santander, the eurozone's biggest bank by market capitalisation, passed recent eurozone stress tests, as did 14 other regional savings banks, known as "cajas", that were analysed.

However, five regional banks failed the tests on weak core capital levels.

Markets have been jittery over Spain's high public deficit, which peaked at 11.2 percent of gross domestic product last year, fearing the country could suffer the same fate as Greece, which needed an EU-IMF bailout.

But Spain has recently seen firm demand for its bonds issuance on abating investor concerns over the nation's ability to cut its fiscal gap.

Spain plunged into its worst recession in decades at the end of 2008 after the real estate bubble burst, and only returned to tepid growth this year.

© 2010 AFP

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