Spain’s largest trade unions and business representatives said Thursday they have broken off months-long talks to reform the country’s strict labor laws, which will force the country’s embattled government to push forward a new reform bill.
The talks lost traction in recent weeks as the unions and business representatives failed to reach agreement on reforms that economists say will be key for a Spanish economic recovery. The reforms where agreement couldn’t be reached include a reduction in the scope of collective bargaining agreements and new rules to make it cheaper for companies to hire and fire employees.
“We haven’t been able to make the unions understand our priorities in this negotiation process,” said Joan Rosell, chairman of Spain’s main business association. “Our stances are very far apart…We can only hope that in a future round of talks the unions are braver and do what needs to be done.”
Earlier Thursday, Spain’s labor ministry said the number of registered jobless claims fell by almost 2% on the month in May to 4.2 million. However, unemployment is hovering around a 14-year high and has emerged as the biggest challenge for a government trying to kick-start an economy badly hurt by a three-year property bust.
Following the release of the May jobless report, Prime Minister Jose Luis Rodriguez Zapatero said his government would approve a labor law overhaul by June 10 if unions and businesses failed to reach an agreement.
Zapatero’s deadline only came after sustained months of pressure on the government to take the lead in the issue. Observers say his government’s weakness removed any incentive for business leaders to lower their demands ahead of a likely victory of the pro-business Partido Popular in general elections that must be called by March 2012.
In addition, economists warned that the recent pickup in hiring in Spain was largely the result of a short-term boost from the country’s large tourism industry ahead of the summer months. The labor ministry said that in seasonally adjusted terms, jobless claims actually rose by 38,033 in May from April.
“These data indicate that unemployment is close to but has not yet peaked,” said Antonio Garcia Pascual, an economist at Barclays Capital in London.
The planned reform will come on top of legislation passed last year. These previous reforms lowered the country’s high cost of dismissal, but economists say they aren’t enough to trigger a recovery in employment.
