Spain Aim to Pass Labour Reforms Before Month End

Spain aims to pass a long-awaited labour market reform before the end of June, with or without an agreement with unions and business leaders, Economy Minister Elena Salgado said on Monday.

Negotiations on thrashing out a deal were held on Monday after the labour ministry said it would extend a deadline for agreement by a week. But Salgado made clear the government would press ahead with the reforms regardless of the outcome of talks.

“The period to reach a pact on the labour market reform is coming to an end and if these talks do not produce the desired results, the government will still begin these reforms … before the end of June,” she said at a conference.

Prime Minister Jose Luis Rodriguez Zapatero, who is battling to prove to nervous world markets that the euro zone’s fourth largest economy will not follow Greece into a debt crisis, got a boost on Monday from IMF chief Dominique Strauss-Kahn.

The International Monetary Fund’s managing director praised a budget austerity package which scraped through parliament last week, but made clear more needed to be done.

“The measures that the government has been taking are strong and should help recover confidence in the future,” Strauss-Kahn said. “The issue now is to see how the measures will be implemented, especially those concerning the labour market,” he told the ABC newspaper.

Imposing a deal without the unions’ agreement would probably set the Socialists on a collision course with their traditional allies at a time when Zapatero could use their support.

Spanish companies have long complained that burdensome hiring and firing costs discourage recruitment, exacerbating the unemployment rate which has hit 20 percent.

But with growing political opposition at home, Zapatero’s ability to push through reforms is limited.

The 15-billion-euro ($18.38 billion) austerity plan scraped through parliament by just one vote on May 27, prompting speculation that Zapatero may be forced to call early elections if his 2011 budget proposal, due in September, is rejected.

Opinion polls over the past few days show the main centre-right Popular Party would beat the Socialists by up to 10.5 percentage points if the elections were held now.