Spain to pass labour reforms on June 16: prime minister

2nd June 2010, Comments 0 comments

Spain's government will approve labour market reforms aimed at reviving the economy on June 16 even if no agreement is reached with unions on the plan, the prime minister announced Wednesday.

"The government will approve the reform of the labour market reforms on Wednesday June 16 at our cabinet meeting, whether or not we get an agreement on it," Jose Luis Rodriguez Zapatero told a news conference.

Zapatero in February unveiled the plan to reform the country's strict labour market rules, measures the International Monetary Fund has said are urgently needed.

The reforms include allowing firms to cut costs by shortening workers' hours but without making them redundant, as Germany has done, to reduce the use of temporary contracts, promote permanent part-time job contracts and encourage the hiring of unskilled youths.

The Socialist government had initially set May 31 as the deadline to reach an agreement but later said the unions and employers would continue meeting over the coming days.

Unions have threatened to call a general strike if the reforms are passed unilaterally by the government.

"Labour reform is necessary in order to help to contribute to creating more jobs, bringing down the employment rate and to ensure we have much more fixed permanent job contracts than temporary contracts," said Zapatero.

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.

The IMF last warned that Spain's economy needs "far-reaching and comprehensive reforms" to its rigid labour market and banking sector if it was to make headway on its own large debt and deficit problems.

Earlier Wednesday the labour ministry announced that the number of unemployed fell in May for the second consecutive month.

Zapatero hailed the figures as "excellent," although admitted "there is a seasonal factor," in that May is traditionally a good month for employment with the start of summer contracts.

He said Spain should "feel confident" about the economy "despite the difficulties, the serious difficulties in the financial markets," he said.

"We see these difficulties on a day to day basis. We know that what is required is confidence to calm the troubled waters."

Last month, parliament narrowly approved a new 15-billion-euro austerity package aimed at slashing the deficit and which includes a five-percent pay cut for civil servants and a freeze on pensions.

Those cuts are on top of a 50-billion-euro package announced in January as Madrid tries to put the country's public finances in order and avoid following Greece into a debt crisis.

Zapatero's government is trying to bring the overall public sector budget shortfall down to the eurozone limit of three percent of gross domestic product by 2013 from 11.2 percent last year.

The Spanish economy entered recession at the end of 2008 and only emerged with tepid 0.1 percent growth in the first quarter.

© 2010 AFP

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