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MADRID : Spain's parliament gave final approval Thursday to a sweeping overhaul of the labour market designed to slash soaring unemployment and revive the economy, despite union plans for a general strike.
The new law -- which will make it easier and cheaper for employers to hire and fire workers -- was slammed by unions as a backward step immediately after its approval by the lower house of parliament.
The government staunchly defended the reforms, which Finance Minister Elena Salgado said "will allow us to climb up the ladder of international competitivity."
The International Monetary Fund has said reforms to its rigid labour market are "absolutely crucial" if Spain is to cut its jobless rate and rein in its massive public deficit.
Spain's unemployment rate has soared to more than 20 percent, the highest in the 16-nation euro zone, following the collapse of the building sector at the end of 2008.
The rise in joblessness has jacked up government spending on unemployment benefits, pushing Spain's public deficit to 11.2 percent of gross domestic product last year, the third-highest in the euro zone after Greece and Ireland.
As the law was passed, several thousand representatives of the country's two main unions rallied in Madrid to prepare for a general strike on September 29.
"Now more than ever a general strike makes sense," the head of the CCOO union, Ignacio Fernandez Toxo, told the rally.
His counterpart at the UGT, Candido Mendez, said the strike would "defend what the country needs" in the face of reforms that are "a step backward on rights and in terms of employment."
However, a poll published at the weekend in the newspaper El Pais said that only nine percent of workers planned to take part.
Spain plunged into its worst recession in decades at the end of 2008 following the collapse of a decade-long property boom and only returned to tepid growth this year.
The Socialist government of Prime Minister Jose Luis Rodriguez Zapatero passed a 15-billion-euro (19-billion-dollar) austerity plan in May aimed at shoring up Spain's public finances amid investor concerns it could follow Greece into a financial crisis.
The Spanish cabinet unilaterally passed its own version of the labour reforms in June after three-way talks with unions and employers collapsed after nearly two years.
The lower house of parliament gave preliminary approval the same month. The final version passed Thursday includes some amendments introduced by the Senate.
Many economists blame the country's high jobless rate on the cost of firing workers in Spain, which makes employers reluctant to hire permanent staff and encourages the use of temporary contracts that have few benefits and rights.
Workers on full contracts are entitled to severance pay of as much as 45 days per year worked, one of the highest levels in Europe. Under the government reform this would be reduced to 33 days for some contracts.
The plan also includes the creation of a government-sponsored fund for each worker that could be used by firms to pay a portion of an employee's severance in case of a dismissal.
- AFP /ls
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