MercoPress. South Atlantic News Agency

Spanish government to unveil drastic reforms to rigid labour legislation

Rajoy with an economy in recession faces 24% unemployment which soars to 50% for young Spaniards

Spain's government will unveil reforms to rigid labour laws on Friday that it hopes will be radical enough to get to grips with sky-high unemployment while not severing links altogether with unions ahead of key regional elections.

The conservative government, elected in a landslide in November, is prepared on Friday to go further with its reforms than a labour pact reached between unions and business leaders at the end of January - even if that risks provoking a general strike.

Workers and management agreed to give more power to companies to hire and fire, reduce the cost of layoffs, and untie wage agreements from inflation.

The government has said it also wants to give firms the ability to modify workers' hours in response to demand rather than simply laying them off, bringing an end to the rapid rise in temporary contracts that has helped push youth unemployment to just shy of 50%.

But it is unclear if that reform will be part of Friday's program and even if it is, the consensus is that a jobless rate now close to 23% will not come down any time soon, rather the contrary according to some of the leading Spanish banks’ estimates.

The Spanish media reports that there is a split in government between those who do not want the reform to be so deep that it brings about a breakdown in relations with labour unions, and those -Economy Minister Luis de Guindos - who want something more radical.

As things stand, analysts believe a desire to retain voter support ahead of upcoming local elections in heavily populated Andalucia and the northern region of Asturias mean de Guindos could lose out.

Prime Minister Mariano Rajoy acknowledged on Wednesday that the difficult economic environment - Spain is facing its second recession in under three years - meant job creation is still a long way off.

“Unfortunately the figures will not improve this year... They are going to get worse,” Rajoy told Parliament. A day earlier, Employment Minister Fatima Banez said the reform would try to end Spain's dual track employment system.

As things stand, an older generation of workers with robust benefits is very expensive to let go, and a younger generation in so-called “junk jobs” or hired on temporary contracts have no benefits or job security.

The government is expected to legislate on collective bargaining agreements in an attempt to give firms more power in setting wages according to their economic circumstances rather than across entire sectors as happens at present.

It will also likely reduce the number of days of severance pay a firm has to pay from a maximum of 45 per year worked at present, with unions hoping for it to be taken no lower than 33, and business leaders hoping for 20. Another likely element will be incentives for firms to hire youth workers.

Meanwhile the stats office confirmed on Thursday that Spanish industrial production fell for the fourth month in December. Output at factories, refineries and mines adjusted for the number of working days declined 3.7% from a year earlier.