Spanish parliament backs ‘crucial’ labour reforms

Spanish lawmakers Tuesday gave preliminary approval to labour reforms deemed essential for slashing the soaring jobless rate and reviving the fragile economy, despite union calls for a general strike.

The lower house of parliament backed the measures — which make it easier and cheaper for firms to fire workers.

But only members of the governing Socialist Party, 168 in total, voted in favour in the 350-seat assembly. Eight deputies voted against and 173 deputies abstained, including those from the conservative opposition Popular Party.

The reforms will now be debated in detail, and possibly amended, in parliament over the coming months before a definitive version is passed.

Labour Minister Celestino Corbacho told parliament “more than eight million workers who either are unemployed or have a temporary employment contract will directly benefit” from the reform plan.

It “increases flexibility for companies without reducing job security, promoting stable employment instead of uncertainty,” he said.

Spain’s unemployment rate has soared to 20 percent of the workforce, the highest rate in the 27-nation European Union after Latvia’s, following the collapse of the labour-intensive construction sector at the end of 2008.

The rise in joblessness has caused government spending on unemployment benefits to soar, which has in turn helped to push Spain’s public deficit to 11.2 percent of gross domestic product last year, the third-highest in the eurozone after Greece and Ireland.

International Monetary Fund head Dominique Strauss-Kahn said in Madrid last week the reforms are “absolutely crucial” if Spain is to slash its jobless rate and rein in the deficit.

The government pushed ahead with its own version of the labour market reform after three-way talks with unions and employers collapsed last week after nearly two years.

The country’s two main unions have called a general strike for September 29 in protest.

They accuse the government of abandoning its commitment to liberal social policies with the reforms, which they charge will merely delay an economic recovery.

Many economists blame the high jobless rate on the cost of firing workers in Spain, which makes employers reluctant to hire permanent staff and encourages the use of temporary contracts that have few benefits and rights.

Workers on full contracts are entitled to severance pay of as much as 45 days per year worked, one of the highest levels in Europe. Under the government reform this would be reduced to 33 days for some contracts.

The plan also calls for the creation of a government-sponsored fund for each worker that could be used by firms to pay a portion of an employee’s severance in case of a dismissal.

The opposition Popular Party said it would seek to introduce amendments to the plan.

“Labour reform is necessary but this is not labour reform,” it is “the reform of (job) dismissals” and will only “increase confusion,” said Soraya Saenz de Santamaria, the PP’s parliamentary spokeswoman.

“We intend to enhance it with our amendments,” she said.

Analysts also said the reforms need to go further.

“As it stands, we remain unconvinced that the reform is decisive enough, in particular regarding flexibility at the company level,” Javier Perez de Azpillaga of Goldman Sachs Global ECS Research said in a research note.

Spain plunged into its worst recession in decades at the end of 2008 following the collapse of a decade-long property boom and only returned to tepid growth this year.

Zapatero’s government passed a 15-billion-euro (18.5-billion-dollar) austerity plan last month aimed at shoring up Spain’s public finances amid investor concerns it could follow Greece into a financial crisis.

The plan is on top of a 50-billion-euro package of spending cuts announced in January designed to slash the public deficit to the eurozone limit of three percent of gross domestic product by 2013.