Spanish unions consider Sept 29 for general strike

Spain's largest union is considering Sept. 29 as a possible date for a general strike, to coincide with Europe-wide protests against austerity measures, a union spokeswoman said on Tuesday.

The CCOO said on Monday it would call a general strike to protest against plans of the Socialist government to reform the labour market after two years of talks between unions, business and government ended without agreement.

The strike piles pressure on an administration battling speculation it is preparing to seek European Union aid in a Greek-style bail-out and struggling to push through a labour reform package seen as essential to restoring competitivity.

Madrid was forced to deny on Friday that it planned to seek aid from the European Union after a newspaper report said Brussels was preparing to activate a package for Spain.

German Chancellor Angela Merkel on Monday said Spain knew it could make use of a 750 billion euro ($1,006 billion) rescue mechanism established for the euro after the treasury secretary acknowledged officially for the first time foreign banks were refusing to lend to some Spanish banks.

Spain is implementing several economic programmes at the same time to boost sluggish growth and rein in a burgeoning budget deficit while bond markets fret about contagion in the euro zone following a bail-out for debt-laden Greece.

The Socialist government of Jose Luis Rodriguez Zapatero, trailing in opinion polls, needs the support of key regional political parties to pass the labour reform through parliament. A 15-billion euro austerity plan scraped through parliament by one vote in May.

The government handed a draft reform to unions, business and political parties on Friday, which got a lukewarm reception from all quarters. Zapatero hopes to get cabinet approval for the proposal on Wednesday and put it to a parliamentary vote on June 22.

The country's two biggest unions are meeting on Tuesday to decide on a definitive date for the strike, and will announce the date at 1500 GMT.

Spain's severe economic downturn, sky-high unemployment and fears of a Greek-style bail-out have battered Spaniards' confidence in their economy and their government.

Spaniards class the government as the third-biggest problem facing the country, after unemployment and the economic crisis, a survey conducted by pollsters DYM for right-wing newspaper ABC showed on Monday, the first time lack of faith in the administration has risen so high in the poll.

Yield spreads of peripheral euro zone government bonds over core German Bunds widened on Tuesday as Moody's downgrade of Greece to junk status refocused market attention on the euro zone debt crisis.

The 10 year German/Spanish yield spread widened to 214 basis points, near record highs, from 208 basis points at Monday's settlement close.