UPDATE 5-Spain unions to battle pay cuts for civil servants

* Government to pass civil servant cuts

* Unions say to challenge pay cuts

* Govt lower 2011 growth forecast

(Updates with cabinet meeting, quotes, latest GDP forecast)

By Carlos Ruano

MADRID, May 20 (BestGrowthStock) – Spanish unions on Thursday
promised to fight austerity moves in the courts after the
Socialist government introduced a cut in public sector wages
through a royal decree, bypassing parliament.

The UGT union, which was already planning a public sector
strike on June 8, said it would contest the legality of such
cuts at the centre of plans for budget reductions of 15 billion
euros ($18.62 billion) announced last week.

“We are without doubt going to challenge this royal decree,”
Julio Lacuerda, a representative of Spain’s second largest union
UGT, told a news conference after meeting government officials
to receive details of the pay reductions.

“This is a complete mockery of our legal right to bargain,”
added Enrique Foussoul of Comisiones Obreras (CCOO), Spain’s
largest union.

The government approved the austerity plan at its weekly
cabinet meeting and an average 5 percent wage decrease this year
for civil servants will take effect on June 1.

“This package of measures aims to accelerate the reduction
of the public deficit,” Deputy Prime Minister Maria Teresa
Fernandez de la Vega told journalists after the cabinet meeting.

“My impression is that the unions want to make noise without
calling a general strike, because a general strike would hurt
the Socialist government deeply,” said Pedro Schwartz, economics
professor at the San Pablo University in Madrid.

Legal experts doubted the unions would be able to
successfully challenge the wage cuts, saying they would have to
prove they were unconstitutional — a tall order.

Spain’s government announced more spending cuts last week to
accelerate a reduction in its budget deficit after the European
Union and International Monetary Fund approved $1 trillion in
emergency funds for weak euro economies.

DEBT FEARS

Traders have fretted that Spain could enter a debt spiral
like Greece as it grapples with a budget deficit that swelled to
11.2 percent of gross domestic product last year. It has
promised to cut the deficit to 3 percent of GDP by 2013.

Last week’s measures would aim to speed up the reductions in
the budget deficit to 9.3 percent of GDP this year and then to 6
percent in 2011.

Spain on Thursday evening revised its forecast for its
public deficit in 2012 down to 4.4 percent of GDP from a
previous estimate of 5.3 percent, according to a government
document.

Economy Minister Elena Salgado also revised down growth
forecasts for 2011 to 1.3 percent from 1.8 percent.

The economy has been mired in its worst recession in
decades and Economy Minister Elena Salgado said the measures
would impact growth. The government lowered its growth forecast
for 2011 to 1.3 percent from 1.8 percent previously but stuck by
its forecast of a 0.3 percent contraction this year.

Salgado also the government would introduce a tax on wealthy
individuals at some stage but there were no concrete plans.

“At the right moment we will present a proposal so that
there is solidarity by those that have most,” Salgado said, when
asked about a special tax for the rich, adding such a measure
would be temporary.

Several government officials have said in recent days that a
tax on the rich is under consideration. [ID:nLDE64G06A]

Separately on Thursday, Spain sold 3.52 billion euros in
10-year bonds in what was seen as a well-received bond auction.

“Bidding was very strong, and 3.52 billion euros is above
the target issuance amount,” said Peter Chatwell, a strategist
at Credit Agricole in London. “Clearly some real money investors
have pounced on this, and I would now expect this to further
improve sentiment for Spanish paper.”

The CCOO and UGT have called a public sector workers’
walkout against the cuts for June 8 and not ruled out further
action, including a general strike.

The unions and government are also heading for confrontation
over labour market reform, which the government wants to
complete by the end of May. [ID:nLDE64H1DN] [ID:nLDE64G0QN]

Growth Stocks

(Reporting by Sonya Dowsett, Manuel Ruiz, Nigel Davis and Paul
Day; Writing by Axel Bugge; Editing by Matthew Jones)

UPDATE 5-Spain unions to battle pay cuts for civil servants