Spain vows labour market reform by end of June

31st May 2010, Comments 0 comments

The struggling Spanish government vowed Monday to push through reforms of the labour market aimed at reviving the economy by the end of June if unions and employers fail to agree on the terms.

El Pais daily earlier reported that the two sides have reached agreement on measures to fight youth unemployment and reduce worker hours during economic downturns but remain far apart on steps to make it easier to fire workers.

"Do not have any doubts, if these talks ultimately do not produce the results we all desire, the government is going to implement labour market reform in the very short term, before the end of June," Finance Minster Elena Salgado told a business forum.

The government had set Monday as the deadline to reach an agreement but said it and the unions and employers would continue meeting over the coming days.

Financial markets have been closely watching the talks amid concerns that sluggish growth in Spain, Europe's fifth-largest economy, could cause the country to follow Greece into a debt crisis.

Last week, the International Monetary Fund warned that Spain's economy needs "far-reaching and comprehensive reforms" of its rigid labour market and banking sector if it was to make headway on its own large debt and deficit problems.

"The labour market is very difficult in Spain and that has been said by many international institutions, including the IMF, which have recommended a reform of the market," IMF managing director Dominique Strauss-Kahn said in an interview published Monday in daily newspaper ABC.

"The government is now taking measures in this sense and we must wait to see the results of the negotiations between the government, the company sector and the workers," he said.

Spain's unemployment rate has soared to 20 percent -- the second highest in the European Union after Latvia -- since the collapse of a property bubble at the end of 2008.

Many economists blame the high jobless rate on Spain's two-tiered labour market, which protects those on permanent contracts with generous severance pay guarantees while those on temporary contracts have few benefits and rights.

At the end of 2009, more than 25 percent of Spanish workers were on temporary contracts compared to an average of 14 percent for the 27-nation European Union in 2008, according to Eurostat figures.

According to El Pais, the government is planning to cut severance pay to 33 days per year worked for people on permanent contracts from the current 45 days and would impose greater restrictions on the use of temporary workers.

Spain two largest unions, the CCOO and the UGT, have threatened to call a general strike if the government unilaterally imposed labour reforms.

© 2010 AFP

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