BC-EU--Spain-Financial Crisis, 2nd Ld-Writethru,0589

Spain defends labor reforms as strike call looms

MADRID (AP) -- Spain defended planned labor market reforms as unions prepared Tuesday to call the country's first general strike in nearly a decade, breaking with a Socialist government desperate to restore confidence among investors wary of its debt-laden finances.

Infrastructure Minister Jose Blanco insisted reforms were essential to encourage companies to hire and thus chip away at a 20 percent jobless rate and stimulate an economy which only just crawled out of nearly two years of recession.

Among other things, the reforms are expected to make it easier and cheaper for money-losing companies to lay people off. However, they also include nods to unions, such as a clause making it more expensive for companies to give workers temporary contracts with few benefits.

Businesses resort to them because full-blown, open-ended contracts provide for severance pay of as much as 45 days per year worked.

A third of the Spanish work force has temporary, so-called "garbage contracts" for as little as a few months -- one of the highest proportions in Europe -- and the vast majority of people laid off in Spain during the recession had them.

"The country needs labor market reform, and needs it urgently, because right now Spain's main problem is job creation," Blanco said.

The minister said the unions' promise of a general strike was disproportionate to the challenges facing a country which during its construction- and credit-fueled economic boom had been one of Europe leading job-creators.

Ahead of a formal announcement expected later Tuesday, one union official, Manuel Fernandez Lopez, said the walkout will be held September 29. Fernandez Lopez is the head of the metalworkers and construction section at UGT, Spain's largest labor federation.

Under pressure from opposition parties which almost defeated a deficit-reducing austerity package last month, Prime Minister Jose Luis Rodriguez Zapatero's government announced a concession Monday on the labor reforms: rather than submit them to Parliament for a yes-or-no vote allowing for no amendments, it is now willing to negotiate changes, although not right away.

The reform package will be approved in a Cabinet meeting Wednesday, and submitted to Parliament for a vote June 22. If passed, the reforms would take effect right away. But then Parliament would undertake debate on changes and vote again, and the initial decree would be adapted to reflect any amendments. This could take a few months.

Spain's last general strike was in 2002 against a center-right government, and also triggered by labor market reforms.

Zapatero has taken pride in his tight relations with unions since coming to power in 2004. But the harsh reality of recession has forced him to renounce these relations, and other pledges he maintained until just a few weeks ago, such as promising not to cut social spending or public sector wages.

Spanish media say unions are leaning toward a September strike in part because a civil servants walkout last week against pay cuts drew little support, and the unions are wary of having another go at an outage so soon and just as Spanish workers start going away for summer vacation.

Also, the unions feel the final version of the reforms might be even more pro-business, so support for a strike might be greater if they wait. Spaniards might also be up in arms by then over separate planned reforms that might delay the retirement age from 65 to 67.

Sept. 29 would also coincide with a series of Europe-wide rallies against austerity cuts.