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Talks on Spanish wage accord drag on

Source: Reuters - Fri 18th Mar 2011

Spain will give unions and businesses more time to reach agreement on unhooking salaries from inflation, Labour Minister Valeriano Gomez said on Thursday, signalling further delays to a final accord on wages.

A reform to de-link wage increases from inflation is the Spanish government's next move to convince markets of the country's long-term economic growth prospects as it battles sluggish growth and unemployment of over 20%.

After pushing through pension reforms in January, Prime Minister Jose Luis Rodriguez Zapatero is under pressure to wrap up the wage accord in time for a European leaders' summit on March 24.

"The government is convinced a unanimous agreement will be reached," Gomez said in a statement.

PM Zapatero signed up to a euro zone competitiveness pact on March 11 in which leaders agreed to give particular attention to ensuring that wages grow in line with productivity, including a review of wage indexation mechanisms.

The collective bargaining process in Spain agrees salary hikes across industries and links wages to consumer prices.

Injecting life into the job market is a key concern for the Spanish government after the collapse of a housing and construction boom. Spain's unemployment rate is more than double the European Union average.

A labour reform last year attempted to overhaul business unfriendly laws, making it easier to hire and fire, but was criticised for not going far enough.

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