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Spain confident of backing for pension reform

Source: Reuters - Tue 18th Jan 2011

Spain's government is confident it can win public support for pensions reforms and expects unions and employers to reach a deal to overhaul collective wage bargaining, Labour Minister Valeriano Gomez said on Tuesday.

The centre-left government is under pressure to reform pensions to persuade international markets it can cut its deficit, and to make its labour market more flexible to reduce unemployment, at 20 percent, the euro zone's highest rate.

Unions have threatened to call a general strike over the pension reforms, which would raise the retirement age to 67 from 65 years. But Gomez said the changes would be implemented in a way that would address public concerns.

Retirees who have been working for at least 41 years - almost half of the workers currently retiring - will not be hit by the rise in retirement age, he told Reuters in an interview.

"The government feels that with these agreements ... it is perfectly possible to forge a wide parliamentary agreement on Jan. 25 which will allow the reform to have sufficient backing in parliament and society as a whole," the minister said.

Gomez also said he was confident that employers and trade unions would agree between themselves on an overhaul of Spain's collective wage bargaining system before a government-imposed deadline of March 18.

Economists, including Bank of Spain governor Miguel Angel Fernandez Ordonez, say Spain will have difficulty climbing out of its economic crisis without overhauling the system which ensures joint wage rises for all firms across sectors.

Employers want more flexibility in negotiating with staff in individual firms. The government says it will impose changes if employers and unions don't reach a deal by March 18.

"If they reach an agreement within the (March 18) deadline, the government will respect their conclusions," Gomez said, adding that the accord must allow companies to be able to adapt to economic crises.

A stagnant economy coupled with high financing costs will keep Spain under pressure throughout 2011 as it tries to cut its public deficit back to EU guidelines and assure that it does not need a bailout like Greece and Ireland.


Gomez said he expects Spain to post net job creation soon, but job growth would be slow at first, with just 40,000-50,000 new jobs in the second half of 2011. "We can only reduce unemployment substantially when we start creating 300,000 jobs per year, and this won't be possible before 2012 or 2013 ... when GDP growth is above 2 percent."

Spain lost about 1.7 million jobs in the collapse of construction and related industries since a decade long housing bubble burst in 2008. The contraction of the sector will draw to a close in 2011, Gomez said, adding that the government has to steer workers from construction into export industries.

"Our future depends on the restructuring of export industries, which is improving significantly. We are one of the few European countries which has not seen its share of exports diminish."

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