Labour talks fail in Spain; government to impose reform (Roundup)

Jun 10, 2010, 12:26 GMT

Madrid - A final attempt by Spanish trade unions and the employers' organization CEOE to agree on a labour market reform failed Thursday, leading the government to start preparations to impose its own reform.

Prime Minister Jose Luis Rodriguez Zapatero's government was expected to adopt a decree instituting the reform, which is aimed at revitalizing Spain's economy and reassuring financial markets about its solidity.

The International Monetary Fund, the European Union and analysts have urged Spain to carry out far-reaching structural reforms, such as making its labour market more flexible, amid fears of a Greek- style financial meltdown in the EU's fifth-largest economy.

Spanish unions, however, resisted CEOE proposals to make firing workers cheaper and to reduce the role of collective bargaining.

The two sides, which have been negotiating for months, failed to seal a deal after 10 hours of talks that lasted into Thursday's morning hours.

The government, which hosted the talks, now intends to approve the reform on June 16. The changes will then need a green light from parliament, where Zapatero's Socialists are in a minority.

The government will present its proposals to employer and union representatives separately on Friday, Deputy Prime Minister Maria Teresa Fernandez de la Vega said.

The government will continue seeking a 'consensus,' Vega said, pledging that Spain would not 'renounce our social model.'

It was not clear what the government proposals will consist of, but the reform is expected to make firing workers cheaper for employers, with a guarantee fund covering part of their severance pay, according to the daily El Pais.

The government is also expected to propose making it easier for companies to slash severance pay from 45 days per year worked to 20 days, and encouraging companies to reduce working hours instead of firing workers in times of crisis.

The reform is partly aimed at increasing the number of permanent work contracts. Spain's strong protections for permanent workers have helped create a two-tier labour market, where more than a quarter of employees are on temporary contracts affording them few rights.

Unions have said they will respond to a unilaterally imposed reform with a general strike. Public sector employees already staged a 24-hour strike on Tuesday, but it drew a weak following, leading to doubts about union strength.