IMF demands "braver" labor reforms from Spain

The International Monetary Fund has asked Spain for "braver" labor reforms that reduce the costs of dismissing workers, make collective bargaining more flexible and decouple pay increases to inflation.

In its annual report on the country, the Fund had general praise for the "strong and wide-ranging" economic reforms enacted by Prime Minister José Luis Rodríguez's government in the past year, but asked it to deepen them, especially in the area of labor.

Although the reforms had helped the economy to recover little by little, the recuperation was not complete and the risks were considerable, said the report. "In that way, there cannot be a let-up in the momentum of the reforms, including improving fiscal consolidation even more, completing the restructuring of the financial sector and courageously strengthening the reforms to the labor market and following up on the agenda of structural reforms," it said. An audacious strengthening of labor reforms was needed to ensure the current high unemployment rate (21 percent) would not become a problem in the medium term, leaving a duality in the job market with young people especially affected by joblessness and temporary contracts.

The fund also requested the government make the cost of dismissing workers lower, at least to that of the European average, and do so in such a way as to encourage permanent contracts.