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Spain — Labour market reforms approved via provisional Royal Decree

17 June 2010
The Socialist cabinet of Prime Minister Jose Luis Rodriguez Zapatero has yesterday approved labour market reforms via a provisional Royal Decree in order to revive the economy and fend off a Greek-style debt crisis. The CCOO and the UGT unions have called for a general strike on 29 September 2010 to protest against the reforms, press agency AFP reports.

The reforms must still be approved by parliament where the government is seven seats short of a majority and relies on the support of regional parties.

The government wants to reduce redundancy pay entitlements for permanent workers from currently 45 days per year worked to 33 days for some contracts. A proposed government-managed fund would cover a part of the severance pay.

The announcement comes after negotiations between the government, employers and the unions collapsed last week after nearly two years of meetings.

The high cost of redundancy payments, which make employers reluctant to hire permanent staff and encourage the use of temporary employment, are partly blamed for the rise of unemployment from 8% in 2007 to 20% today.

Spain has a public deficit of 11.2% of Gross Domestic Product, the third largest in the Euro zone after Greece and Ireland. Spain's borrowing costs have risen sharply following a downgrade by international debt rating agencies.

The European Union has backed the 15 billion Euro austerity package, which was passed by the Spanish parliament by only one vote.

European Commission Spokesman, Amadeu Altjaf Tardio, has dismissed "as rubbish" a report by the Spanish newspaper El Economista that Spain was about to seek 250 billion Euro from the European Union Rescue Fund.

Government sources said that Prime Minister Zapatero would defend the economy against constant "speculative rumours at today's EU summit where he will present the labour reform.

To read the Royal Decree in Spanish language please click here



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