MercoPress. South Atlantic News Agency

Spanish Socialists approve labour reforms; conservatives abstain

Labour Minister Celestino Corbacho

Spanish lawmakers Tuesday gave preliminary approval to labour reforms considered essential for slashing the soaring jobless rate, reviving the fragile economy and sending a strong message to nervous markets.

However, the measures which make it easier and cheaper for firms to fire workers were only supported by the ruling Socialist Party 168 Deputies out of a 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% of the workforce, the highest rate in the 27-nation European Union, 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% of GDP last year, the third-highest in the Euro zone after Greece and Ireland.

IMF 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 Spanish 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.

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.

Rodriguez Zapatero's government passed a 15-billion Euro 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 Euro zone limit of 3% of GDP by 2013.