Spain's Socialist government will next week present a series of proposals to reform the labour market, sources close to labour talks say, part of an essential overhaul to get its sagging economy into shape.
But reducing the cost of hiring and firing, a key tool to combat the highest unemployment rate in the euro zone at 19 percent, will still take months of discussion between unions, employers and the government, and the result does not seem certain, according to sources.
The initial proposals to be presented next week will centre on less controversial areas, such as providing employer incentives to hire younger workers and making it easier for companies to reduce working hours in tough economic times. "Some time next week we're expecting a proposal from the government which should contain some concrete measures to be taken, based on the talks," said one of the parties involved in the negotiations.
The talks, restarted in February after breaking down last summer, so far have been bogged down by incompatible demands from business representatives and union leaders. The government, lagging in opinion polls, so far has been unwilling to impose unpopular measures despite Spain's worst recession in half a century.
In early February the government provided an open-ended blueprint for talks, but shied away from taking tough austerity initiatives such as similarly indebted eurozone member Ireland.
Discussions hinge on how to remove the dual tier system which erodes Spanish competitiveness. Severance payments for long-term workers are among the highest in Europe, but those on temporary contracts have almost no rights at all. With almost one in five Spaniards out of work, Prime Minister Jose Luis Rodriguez Zapatero is keen to get an agreement which would help cut unemployment and therefore reduce the government's benefits bill - which swells a public deficit of 11.4 percent of gross domestic product (GDP). But talks on loosening the terms of temporary and permanent contracting and their cost, still have some way to go, participants say, although they are loathe to provide details.
"These are subjects which need more study," said one source, while another said it could take until summer for any progress. He added unions were not prepared to discuss cutting social security contributions for employers - a key sticking point. Making Spain's labour markets more efficient would reassure investors that the government will be able to boost tax revenue when economic activity benefits from the changes.