MADRID, May 31 (Reuters) - 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, May 31.
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 an austerity budget 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.
The minority Socialist government maintained a neutral tone in a statement issued after the end of Monday’s talks.
"Differences between the parties still exist on some aspects of work relations that are being discussed," the Labour Ministry statement said.
"However, the parties understand that there is still a chance of reaching an agreement so they have decided to continue talks in the coming days."
Gerardo Diaz Ferran, chairman of Spain’s CEOE business association, said the three-way talks would continue but the participants were far from close to an agreement.
"The truth is there are still a lot of differences, significant differences, between us, and we’re not close to an agreement," he told reporters.
"The three parties have decided it’s worth giving it a few more days to see if by doubling our efforts, which I don’t know how we’re going to do because we’re already giving all we’ve got, we can bring our positions a little closer," he added.
POLL SLUMP
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.
BONDS STAY CALM
Fitch Ratings agency downgraded Spanish sovereign debt to AA+ on Friday night, but markets barely reacted on Monday with 10-year bond spreads rising only five basis points against the German bund from Friday’s close.
Some analysts had expected worse after Standard & Poor’s last month downgraded Spain by one-notch to AA with a negative outlook. Fitch said its outlook on the new rating was stable.
"There’s some tolerance in this rating level," Fitch analyst Brian Coulton told Reuters. "There will be some deterioration in the credit profile going forward but … at this point our judgment is that we will not going to be taking the rating down further in the next year."
Spain’s two largest unions have threatened a general strike if the government tries to impose reform on its own.
Without citing sources, El Pais said the unilateral plan the government was working on would allow companies to make greater use of cheap work contracts for a broader range of employees.
At the moment, these special contracts allow some workers to be hired on the basis of reduced redundancy payments — 33 days of salary per year worked instead of the normal 45 days — in the event they are later fired.
The government has said if it is forced to try to implement its own plan, it would do it by legal decree, which still has to be approved by parliament but cannot be amended.
