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A woman cleans a shop window
in Madrid.

Spain revamps labour market

Madrid, February 11, 2012

Spain's right-leaning government slashed employees' maximum severance pay in a sweeping labour reform unveiled yesterday to confront a near 23 per cent unemployment rate.

The drastic labour market shake-up, which risks sparking a union backlash, was the third major reform in two weeks by a government racing to find an antidote to Spain's deepening economic malaise.

After proposing legislation to cut the annual public deficit to zero by 2020 and enacting a reform obliging banks to set aside 50 billion euros against soured property assets, Madrid is now targeting the jobs crisis.

'The government's goal is to fight joblessness,' Employment Minister Fatima Banez said after Prime Minister Mariano Rajoy's cabinet adopted the new measures in a decree. 'It is a reform that can be considered historic.'

The number of jobless people shot above five million at the end of 2011, sending the unemployment rate to 22.85pc - double the European average and the highest in the industrialised world.

Among those aged 16-24, the jobless rate was 48.6pc.

Some analysts argue that part of the problem is high severance costs deterring employers from hiring.

Others say the real problem is a major split in the market - on the one hand there are permanent contracts based on collective bargaining that offer high severance pay; on the other temporary workers have little protection.

The latest reform, which affects small businesses and the self-employed accounting for 85pc of all workers, effectively cuts the maximum severance.

The previous Socialist government, ousted in November 20 elections by the Popular Party, had introduced a new labour contract with a 33-day-a-year maximum severance and just 20 days for financially-driven layoffs.-Reuters

Tags: Spain | revamp | Labour market |


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