UPDATE 1-Spain unions threaten strike over labour reforms

* Investors fear worker unrest would block spending cuts

* Labour reform crucial to success of austerity moves

(Recasts, updates throughout with press conference)

By Tracy Rucinski

MADRID, May 27 (BestGrowthStock) – Spanish unions warned on Thursday
that they would call a general strike if the government pushed
through planned reforms of the labour market without their
consent.

The threat came after union leaders held an extraordinary
meeting to decide how to respond to austerity measures rushed
out by the Socialist government to dispel fears a euro zone debt
crisis which started in Greece will spread to Spain.

A union spokesman said a Europe-wide union meeting was
planned for June 1 in Brussels to discuss alternative solutions
for fighting the economic crisis.

The reaction of workers in Spain and other countries is
being closely scrutinised by investors who fear massive protests
could hamper the ability of governments to implement austerity
measures.

The two largest Spanish unions, Comisiones Obreros (CCOO)
and the Union General de Trabajadores (UGT), said they would
call a general strike but would exhaust all avenues of
negotiation to find agreement on labour reform.

“Both the CCOO and the UGT’s view is to give a full response
both to the austerity plan and to any potential labour reform
that would be introduced by decree, which would be damaging to
our country,” CCOO head Ignacio Fernandez Toxo told journalists.

The unions have met several times with business association
CEOE this week to hammer out an agreement before a government
deadline for the reform at the end of May.

“We don’t have a deadline… but we’re aware that the
circumstances call for an agreement as soon as possible,” Toxo
said. “If it can’t be tomorrow, then Monday, and if not Monday
we’ll keep negotiating.”

Spanish unions are an influential player in the debate over
labour market reforms that economists say are vital to restoring
competitiveness and sustainable growth in an economy saddled
with 20 percent unemployment, the highest rate in the 16-nation
euro zone.

A key demand from economists is greater flexibility in
hiring and firing workers. Payments for laying off workers are
among the highest in the OECD.

The unions have already called a public sector strike for
June 8 to protest against austerity moves announced earlier this
month to accelerate reductions in the budget deficit. The main
question now is whether they will go further and call a general
strike involving public and private sector workers.

“The only card the unions have left is a general strike. So
the question is what do they want from the labour reform so as
not to call that card. They’re running out of time,” said Ismael
Crespo, a political analyst at Fundacion Ortega y Gasset.

The austerity package would save an additional 15 billion
euros and includes wage cuts of 5 percent for civil servants
this year. It aims to cut the budget deficit to 9.3 percent of
gross domestic product (GDP) this year, from 11.2 percent in
2009, and then to 6 percent in 2011.

Spain’s government announced the tougher austerity after the
European Union and International Monetary Fund approved $1
trillion in emergency funds for weak euro countries in an effort
to contain the euro debt crisis.

Spain’s challenge was highlighted early this week when
global financial markets slumped on news its central bank had
taken over a small regional savings bank. The move sparked fears
about the stability of the banking system.

Growth Stocks

(Writing by Axel Bugge; Editing by Noah Barkin)

UPDATE 1-Spain unions threaten strike over labour reforms