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The governor of the bank of Spain, Miguel Angel Fernandez Ordonez, has called for a change in Spanish employment law in his latest Monthly Economic Bulletin, Expansion reports.
Ordonez believes that the high cost of dismissal for Spanish permanent employees hinders the creation of permanent jobs and drives employers towards temporary employment contracts. He suggests a reduction in the costs of dismissal for permanent employees, instead.
The governor also predicts that the government's estimates of a -0.3% Gross Domestic Product (GDP) contraction in 2010 and a +1.8% GDP growth for 2011 are overly optimistic. He predicts a -0.4% GDP contraction for 2010 and only +0.8% GDP growth for 2011.
Ordonez expects an average rate of inflation of 1% for 2010, which is low given the likely impact of the planned VAT increase this summer.
The Deputy Prime Minister, Maria Teresa Fernandez de la Vega, has defended the government's GDP predictions but refrained from commenting on Ordonez's suggestions regarding dismissal costs for permanent employees.
However, CCOO union leader Ignacio Fernandez Toxo, said that "the Bank should stop interfering in the social dialogue and concentrate on what it is there for. The governor should put all his efforts into ensuring that credit flows again to families and businesses instead of taking away rights from workers."