Business

Spain to move ahead with labour market reform

Spanish Prime Minister Jose Luis Rodriguez Zapatero
Image caption Jose Luis Rodriguez Zapatero says the reform is vital

The Spanish government has vowed to move ahead with labour market reform, even if it does not reach a deal with unions and employers.

Prime Minister Jose Luis Rodriguez Zapatero said the measures would go before his cabinet on 16 June, before going to parliament for a final vote.

His Socialist government wants to make it easier and cheaper for firms to both hire and sack staff.

It says the reform is vital to bring down Spain's 20% unemployment rate.

Austerity measures

"The government will approve the labour reform at a cabinet meeting on... 16 June, whether or not there's an agreement [with unions and employers]," said Mr Zapatero.

"Labour reform is needed to contribute to job creation, reduce unemployment and boost our labour market."

The government has yet to release the details of the proposed measures.

Economists have long said that labour reform is vital to enable Spain to solve its long-term economic problems, but the legislation may struggle to be passed by parliament.

Last week, the Spanish parliament backed the government's 15bn-euro ($18.4bn; £13bn) public sector austerity package by just one vote, as a number of government backbenchers either abstained or voted against the plan.

The austerity measures include wage cuts of 5% or more for civil servants, and big reductions in public investment plans, as the government aims to reduce its public sector deficit from 11% of GDP to 6% by 2011.

The government also plans to reform the country's banking sector, the third change that economists say is vitally needed to help Spain's economy recover.