Spain gives nod to landmark labor reform

MADRID — Spain’s left-wing ruling coalition on Tuesday secured its hold on power with the approval of a landmark labor reform backed by both unions and employers and a new national spending plan for next year that includes a hefty disbursement of pandemic recovery funds.

An array of left-leaning and nationalist lawmakers gave the final go-ahead to Spain’s $509 billion budget for 2022, which allocates more than half of the funds to education, health, pensions, subsidies and other forms of social spending.

The decree passed Tuesday by the Cabinet of Prime Minister Pedro Sanchez overhauls the country’s labor rules, a commitment by his government with the European Commission before the end of 2021 in order to secure the next installment of EU pandemic funds.

The labor reform reverts business-friendly regulations adopted in 2012 by a previous conservative administration at the height of last decade’s sovereign debt crisis.

It limits most temporary contracts that are prevalent in the eurozone’s fourth-largest economy to a maximum of three months and brings back collective bargaining with unions as the main channel to negotiate contracts. It also adopts the furlough program used to avoid layoffs during the COVID-19 pandemic as a fixed tool for companies to turn to in future crises.

The reform has been sanctioned by workers’ unions and trade associations, a rare achievement for the government and a personal win for Labor Minister Yolanda Diaz, who has become the rising star in United We Can, the coalition’s junior partner.

“This reform turns a page on the precariousness in Spain,” Diaz said after the Cabinet meeting, referring to official data that shows that 1 out of 4 contracts in Spain is short-term, the highest rate in the EU.

The new rules take effect Wednesday, although the government will need to find support again from smaller parties to ratify the changes in a parliamentary vote early next year.