Spain hit by public sector strike

Hundreds of Spanish civil servants blew horns and chanted protest slogans today outside the Finance Ministry in downtown Madrid as they took part in a one-day strike to protest wage cuts aimed at reducing the country's huge deficit.

The stoppage was seen as a first test of strength for unions that are considering calling a general strike if the Socialist government imposes too-severe labour market reforms. It was called after the Socialist government of Prime Minister Jose Luis Rodriguez Zapatero ordered a 5 per cent average wage cut in civil servants' salaries as part of a plan to save €15 billion ($19 billion) this year and next.

"This government is totally inept," said Alfredo Barrero Sanchez, 55, who said he earns €1,100 ($1,315) a month.

He criticized the government for previously playing down the economic crisis and saying no cutbacks were necessary.

"In the end, look what has happened to this country," he told the AP.

Spain's two main unions, UGT and CCOO, said the strike was being heeded by some 75 per cent of workers. The Labour Ministry, however, put the figure at 16 per cent.

Spain has some 2.6 million civil servants. Called to strike were workers in government offices, schools and hospitals but not public transport. Observance of agreed minimum services meant most workplaces functioned almost as usual.

In the protest outside Finance Minister Elena Salgado's offices, Pepe Molina, 50, wore a sign that read, "I have been robbed of €80. How about you?"

"Lowering a person's salary is the worst thing you can do to them," he said. "If Zapatero is not capable of getting us out of this mess he should call early elections."

A major demonstration was to be held in Madrid later today.

Today the government is to unveil its proposed labour reforms to union and business leaders but Zapatero has warned that unless both groups reach agreement, the government will approve the reforms by decree on June 16.

Talks on loosening up Spain's rigid labour market have been going on for months, but have taken on new urgency amid worries about Spain's ability to ensure economic growth, slash its deficit and pay off debt.

Zapatero has come under pressure from the European Union, the International Monetary Fund and even President Barack Obama to take bold action to ward off a Greek-style debt crisis.

Chiefly, Spain must find a way to rein in its deficit from 11.2 per cent of gross domestic product last year to 9.3 per cent in 2010, and eventually to 3 per cent in 2013.

The reforms centre on overhauling hiring and firing rules, so as to encourage employers to hire more and thus spur economic growth. One expected measure would reduce Spain's severance pay deal for permanent workers — one of the highest in the developed world — from 45 days per year worked to 33 days.

Europe's top job creator two years ago, Spain now has the region's highest unemployment rate at just over 20 per cent following the collapse of its construction sector and the economy's slide into recession.