Labor reform shows Spain’s seriousness, Germany says

Germany on Monday praised the Spanish government’s far-reaching labor reform, which makes it easier and cheaper to fire workers, a development that has understandably raised the hackles of the unions.

The government of Chancellor Angela Merkel highlighted the overhaul of the job market as an example of the measures Europe needs to seize upon to overcome the economic crisis.

The new rules cut severance pay for employees on open-ended contracts from 45 days per year worked up to a maximum of 42 months to 33 days and a cap of two years’ salary.

However, under so-called “objective reasons” employers can sack workers with compensation of only 20 days wages per year of service up to a maximum of one year. Objective reasons include, for example, three consecutive quarters of falling sales. The reform also leaves the way open for companies to cut salaries in times of economic downturn.

German government spokesman Steffen Seibert said Monday the new measures “show the determination” of the government of Prime Minister Mariano Rajoy to tackle Spain’s economic problems and return the country to the path of growth. Seibert argued the reform would create more jobs in Spain, make the country more competitive.

After a meeting on Monday with Labor Minister Fátima Báñez, the leaders of the country’s main unions, Ignacio Fernández Toxo of CCOO, and Cándido Méndez of UGT, lamented the new measures, which they said would make it “free and easy” to sack workers in the case of companies with fewer than 50 employees.

“This is set to destroy a lot of jobs in the short term,” Fernández Toxo said. It’s not a reform in favor of the unemployed; instead it blames them for the situation.”

Méndez said the reform was a sop to the financial markets and the rest of Europe. “They have taken these measures because the Spanish economy needs financing, and in order to pacify the financial markets,” he said. “From the point of view of labor, this is a wrong, unfair and dangerous way to go to overcome the crisis.” He added it would be “useless” in terms of reducing the jobless rate, which stood at 22.85 percent at the end of last year.

The two labor leaders said the legal services of their unions are studying some of the aspects of the reform, which they suspect might be in breach of the Constitution. Méndez and Fernández Toxo said UGT and CCOO would make suggestions for amendments to the labor reform but held out little hope of serious changes being introduced when the decree enshrining the new measures is debated in Congress.

The unions have threatened a series of protests against the measure leading up to, if need be, a general strike.

Báñez on Monday defended the reform as essential in dealing with unemployment. “What we had up to now meant the destruction of 2.7 million jobs since the start of the crisis,” she said. “What we couldn’t do was do nothing.”