Spain to decree crucial but contested labour reform

* Opposition parties keep cards close to chest on vote

* Popular Party calls government proposal slapdash

* Spanish/German 10-year bond yield spread at record

By Sonya Dowsett

MADRID, June 16 (BestGrowthStock) – Spain’s cabinet was due to issue
labour reforms plans on Wednesday it says are key to reviving
its sluggish economy, but faces lack of support from opposition
parties and calls for a general strike by labour unions.

The minority Socialist government, fighting speculation it
may need a Greek-style bail-out, needs backing for a major
shake-up of the country’s rigid labour market if the proposal is
to be ratified.

The cabinet began meeting at 0930 GMT to approve the decree,
which is due to come into effect on Thursday. The government
will hold a press conference at 1145 GMT.

The proposals have to be ratified by parliament within 30
days to remain in force. A parliament vote is due on June 22.
For a factbox on the draft proposals click on [ID:nLDE65A271]

That vote is likely to be close after a 15 billion euro
($18.52 billion) austerity plan scraped through parliament by
one vote in May, thanks to a regional party abstaining.

The governing Socialists can muster 169 votes in the
350-seat lower chamber, but the conservative Popular Party (PP),
with 153 votes and key minority parties have so far kept their
cards close to their chest as to how they will vote.

“We are not going to adopt a definite position until we know
the content of the decree,” said Josu Erkoreka, spokesman for
Basque nationalists PNV, who have six seats.

Political analysts predict opposition parties would end up
supporting the bill, albeit unwillingly, in order to avoid
undermining market confidence in Spain.

“They will get enough support to pass because everybody is
convinced that it is necessary, although the measures are very
unpopular and (most parties) don’t want to be seen as supporting
them openly,” said Juan Aviles, Professor of Contemporary
History at Spain’s Open University, UNED.

The government handed unions, business and opposition
parties a draft proposal for labour reform on Friday, which drew
a lukewarm reception from all quarters. The government has since
been meeting with key parties to seek support for the reform.

During the ratification vote, parties can request that the
decree is processed through parliament as a law. If that request
is accepted, as the government has said it will be, it can be
amended and changed, starting a process that can take around six
months, according to one political law expert.

The PP has not objected to labour reform in principal but
has criticised as sloppy the government’s draft bill, drawn up
after it failed to reach consensus with unions and business.

“The government does not want to tackle labour reform in a
thorough manner,” said PP Secretary General Maria Dolores
Cospedal. “True reform is needed and not a slapdash job drawn up
to satisfy social groups and international markets.”

STRIKE CALL

Spain is pushing through several economic programmes at the
same time, including austerity measures and an overhaul of its
banking system, while bond markets fret about contagion in the
euro zone following Greece’s debt crisis.

European policymakers have recently sought to quash talk of
a euro zone rescue for Spain as the country’s borrowing costs
rose further in a debt auction on Tuesday. [ID:nLDE65F0GX]

Spanish yield spreads against the German benchmark widened
to 222 basis points on Wednesday, their highest level since the
common currency was adopted.

Spain’s biggest unions called on Tuesday for a general
strike in September against the labour reforms, the first they
have called against traditional ally Prime Minister Jose Luis
Rodriguez Zapatero, in power since 2004.

However, Spanish commentators say unions are in a weak
position with unemployment at 20 percent and many workers on
temporary contracts, so the strike was unlikely to get much
support.

The fact the strike was called so far in the future, and at
a date to coincide with Europe-wide protests on austerity
measures, was a sign of unions’ weakened stance, commentators
said.

Investment Tools
(Additional reporting by Elisabeth O’Leary; Editing by Jon
Boyle)

Spain to decree crucial but contested labour reform