Spanish Prime Minister Jose Luis Rodriguez Zapatero is bracing for the biggest strike since his 2004 election as efforts to tame Europe’s third-largest deficit with wage cuts rile the Socialist premier’s core supporters.
About 2.5 million government workers have been called on to strike today, hobbling services from schools to television broadcasts. The walkout may be a prelude to a general strike that unions have threatened over the government’s plan to overhaul labor rules that may make it easier to fire workers in a country where the unemployment rate has reached 20 percent.
“The margin to avoid a general strike is very narrow as a profound labor reform is needed,” said Jose Luis Martinez, a strategist for Spain at Citigroup in Madrid.
Zapatero, who said in 2005 he slept with his union card by his bed and pledged full employment, has been forced to cut wages and freeze pensions to convince investors and European allies he can reduce a budget deficit of 11.2 percent of gross domestic product. The risk premium on Spanish debt is at a 13- year high as the domestic backlash fuels concerns he won’t be able to make good on the deficit controls.
The strike comes a day before government leaders, union officials and employers hold what may be the last round of talks on changing labor laws before a June 16 deadline when the administration will impose a new system. The government is backing employers’ calls to loosen firing rules by making it easier for companies to claim economic hardship and pay less severance.
Firing Rules
Currently employers must offer 45 days’ pay for every year worked to fire individuals protected by permanent job contracts. That severance drops to 20 days in cases when the company can convince a labor court it needs to reduce staff for economic reasons. The government is proposing to make it easier for employers to qualify for the 20-day payout, state-controlled radio network RNE reported on June 3, citing a draft of the plan.
“Spain cannot afford to not do a labor reform,” said Alfredo Pastor, a former deputy finance minister and a professor at Spain’s IESE business school. “Until something is done in that direction, confidence won’t be regained in the markets.”
Workers have said any changes to the rules that harm job security will trigger a general strike, the first in Spain since 2002, when the country was ruled by the opposition People’s Party. Employers and economists say that Spain has some of the most rigid labor market rules in Europe, discouraging companies from taking on workers even when times are good. Unions argue that the doubling of the unemployment rate to 20 percent in two years proves that companies have no problem cutting workers.
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