Spain approves labour reforms

23 Jun 2010, 6:30 am   -   Source: AAP
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Spain's Parliament gave reluctant approval to long-awaited reforms designed to boost the economy by shaking up a rigid labour market.

Spain's Parliament gave reluctant approval on Tuesday to long-awaited reforms designed to boost the economy by shaking up a rigid labour market, with opposition parties worrying the changes are too little, too late and won't make a serious dent in the country's 20 per cent jobless rate.

After austerity measures passed last month by just one vote, the tally in the lower chamber gave another vivid show of how isolated Socialist Prime Minister Jose Rodriguez Zapatero has become. He is struggling to resurrect what had been a European economic success story just two years ago and calm investors and markets concerned that Spain's troubled public finances could lead the country into a Greek-style debt crisis.

The reform package - aimed in large part at making it easier and cheaper for companies to lay off workers - passed by a vote of 168 in favour, 8 against and 173 abstentions.

Only the premier's Socialist party voted in favour, and one of his politicians - a former union boss - abstained in a rare break with party discipline.

The reforms have been in force since the Cabinet approved them last week, after long-running talks between labour and management collapsed and Spain got another sobering scare from a credit rating downgrade by the Fitch agency - the second in a matter of weeks.

Tuesday's vote ratified the reforms in a fast-track procedure allowing no amendments. Now, parliament will undertake debate in earnest and consider possible changes, opening up months of uncertainty over what the final law will actually do.

For now, the changes in hiring and firing rules address a long-standing complaint by business owners that Spain's severance payment system for workers who are released - as much as 45 days of pay for each year worked - discouraged them from giving workers full-blown, open-ended contracts. For contracts signed from now on, that goes down to 33 days, but the 45-day ones in force remain so.

The package will also gradually make it more expensive for companies to give people temporary, so-called garbage contracts with few benefits - a practice so common that nearly third of the work force has them.

"Make no mistake, the measures contained in the decree are going to contribute to net creation of jobs," ruling Socialist party spokesman Jose Antonio Alonso said.

The centre-right Popular Party described Zapatero's plan as a panicked knee-jerk reaction to pressure from the European Union and the IMF after ignoring a crisis that has seen the jobless rate double since 2008.

The government has estimated the reforms will create more than two million jobs in two years.

But some are not convinced they will prompt companies to hire en masse, which is what Spain needs desperately to resurrect an economy that only just crawled out of nearly two years of recession.

Bank of Spain governor Miguel Fernandez Ordonez welcomed the changes as a good first step but said they do not go far enough.

Out on the street, Susana Diaz, 31, a pastry shop manager, said the reform came too late. "If I'm about to fall into the void, then I would have been more interested in someone giving me a parachute before rather than throwing me one while in free fall."

Unions have called a general strike to protest the package, but not until September 29. The delay is seen as showing their jitters after a civil servants strike this month over wage cuts drew little turnout.

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