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Spain unions snub gov't pension reform compromise

Source: Reuters - Wed 12th Jan 2011

Spanish unions rejected on Wednesday a compromise proposed by the government in talks aimed at securing a deal on pension reforms considered central to attempts to revive the economy.

Unions have threatened a general strike over government plans to raise the retirement age to 67 from 65, and the two sides are locked in negotiations whose shelf life expires on Jan 28, when Socialist Prime Minister Jose Luis Rodriguez Zapatero's cabinet is due to approve the reform.

Zapatero says he will raise the retirement age with or without union backing.

Deputy Prime Minister Alfredo Perez Rubalcaba, who met with union leaders on Saturday and Monday, said on Wednesday the government was open to allowing people who have made pension contributions for 41 years to retire at 65.

"We reject the retirement age rising to 67 even with this new proposal, which is not new and was proposed months ago," said a spokesman for the largest union, Comisiones Obreras.

The proposal had not been made public previously.

The prime minister has argued that pension reform without consensus is better than no reform at all, which would send the wrong message to investors who have driven yields on Spain's sovereign debt higher on doubts over its economic stability.

On Tuesday the key risk premium as measured by the spread between the yield on Spanish ten-year debt and German benchmark bunds narrowed by around 20 basis points to around 244, benefiting from positive newsflow.

Portugal earlier in the day successfully placed 1.25 billion euros of bonds while the European Union executive called for greater emergency lending power to underpin the euro zone's finances.

Spanish unions have threatened a general strike should the government push through a rise in the retirement age. The last general strike, on Sept. 29,. was poorly supported, available evidence suggests.

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