Spanish parliament approves controversial labour reforms

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Spain's parliament gave final approval Monday to hotly disputed labour reforms aimed at slashing the soaring jobless rate and reviving the fragile economy.

The reforms -- which will make it easier and cheaper for employers to fire workers -- have angered unions, who have called a general strike for September 29 in protest.

The lower house of parliament approved the new law, including some amendments introduced by the Senate, in the final step of a parliamentary process.

Spain's unemployment rate has soared to more than 20 percent, the highest in the 16-nation eurozone, following the collapse of the building sector at the end of 2008.

The rise in joblessness has jacked up government spending on unemployment benefits, pushing Spain's public deficit to 11.2 percent of gross domestic product last year, the third-highest in the eurozone after Greece and Ireland.

The International Monetary Fund has said the labour market reforms are "absolutely crucial" if Spain is to cut its jobless rate and rein in the deficit.

The Spanish cabinet passed its own version of the reform in June after three-way talks with unions and employers collapsed after nearly two years. The lower house of parliament gave preliminary approval the same month.

The country's two main unions accuse the government of abandoning its commitment to liberal social policies with the reforms, which they charge will merely delay an economic recovery.

The government staunchly defended the measures Thursday.

Unemployment "continues to be the main economic challenge" facing the country and the new measures will "generate employment and stability," said Minister of Public Works and Transport Jose Blanco.

They are "positive for all workers, for those that have jobs as well as those who are trying to find them," he told an economic forum in Madrid.

"Even though this reform will not be enough to resolve all our employment problems, it will of course make the path easier."

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 includes 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.

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 (19-billion-dollar) austerity plan in May 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 progressively slash the public deficit to the eurozone limit of three percent of gross domestic product by 2013.

© 2010 AFP

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