* Three-way talks end with no deal, as expected
* Government says informal talks will continue
* To discuss reform with other parties to get backing
* PM says confident of majority support in parliament
(Adds bond auction results, PM, union wage cuts appeal)
By Tracy Rucinski
MADRID, June 10 Formal talks between Spain's
government, unions and business ended with no agreement on
labour reforms on Thursday, but the government said it was
confident of pushing the measures though parliament this month.
The reforms, aimed at loosening a rigid labour market, are
seen as essential to ensuring Spain's long-term economic
recovery and to ease market fears of a Greek-style debt crisis.
The minority ruling Socialists want to reach a consensus on
the measures, and say informal talks with unions and business
will continue, but have said they are determined to push them
through with or without it.
They have started talks with smaller political parties on
the reforms, Spanish media have said, and will present a working
document with their proposals at Friday's cabinet meeting.
With the largest opposition Popular Party sure to vote
against any Socialist proposals, the government depends on
regional parties like the Catalan Nationalists (CiU) to pass any
The CiU's 10 votes would be enough to push the reforms
through parliament. Without them, the government would have to
cobble together votes from an array of other parties.
A 15-billion-euro ($18-billion) austerity plan scraped
through parliament by one vote in May after the Catalans
abstained. The CiU told Spanish television on Wednesday it would
not abstain this time, however, and would vote for or against.
Spanish Prime Minister Jose Luis Rodriguez Zapatero said on
an official visit to Italy on Thursday he was confident of
receiving majority support in parliament for the reforms, which
he promised would be substantial.
"We want a model that makes permanent contracts the norm,
that reduces the cost of firing without sacrificing workers'
rights and that clearly changes businesses' flexibility in terms
of working hours, conditions and wages," Zapatero said.
"We're confident it will have majority support in
parliament," he added.
Spanish government bond yields have surged because of
worries about the its ability to cut its deficit -- 11.2 percent
of GDP last year -- and implement economic reforms.
The government would like to see borrowing costs ease before
a huge debt redemption in July.
Spain saw solid demand for a new 3-year benchmark bond on
Thursday, a positive sign for the Treasury ahead of the July
redemption, but at a premium above a similar issue in April.
Peripheral yield spreads over German Bunds narrowed after
the auction, with a 10-year Spanish/German spread at 195 basis
points from 205 basis points at the previous day settlement, but
still well up from 160-170 in early May.
DOOR STILL OPEN
The government said it was open to informal discussions with
unions and business leaders after all-night talks ended in the
early hours of Thursday, and planned to have bilateral meetings
with both parties on Friday.
In the meantime, the government's draft would go to
politicians and the cabinet, with an eye to the cabinet passing
the final document next week, possibly at a special meeting on
June 16, a labour ministry spokesman said.
That deadline could always be extended, he said.
"If it really looks like we can get an agreement (with
unions and business), it could go on another week," he told
Failure in parliament would be a huge blow to Zapatero and
could even force him to call an early election.
"The government's best option to save the reform in
parliament is to get an agreement with the unions and business
leaders, so it's going to exhaust that option," said Esther
Sanchez, a private law professor at business school ESADE.
"But it can't wait too long. International pressure is
massive," she added.
The labour reform aims to end a rigid two-tier system that
drastically divides temporary and permanent workers to tackle
the highest unemployment rate in the euro zone at 20 percent.
Unions have opposed the reforms, which they say violate
workers' rights, and the government has been reluctant to sever
ties completely with one of its traditional bases, even though
they only represent 16 percent of the country's workforce.
"The differences are fundamentally about the cost and
reasons for firing," Fernando Lezcano, a spokesman at Spain's
largest union Comisiones Obreras (CCOO), told Reuters after the
On Thursday, CCOO said it was filing an appeal with the
Spanish Supreme Court against the 5 percent wage cuts for public
workers included in the government's austerity package.
A nationwide public sector strike against the austerity
plans on Tuesday was deemed a failure by Spanish media as it did
not disrupt services or attract many people to evening marches.
Tuesday's strike action was seen as a litmus test for
support for a general strike which unions have threatened to
call if they are unhappy with the labour reform proposals.
"People are fed up, regardless of who they vote for, and
most people with an awareness of economics just want to get on
with their work," said Sanchez from ESADE.
"If we follow the unions or the politicians, then we're
really in trouble," she said.
Unions called on the 65,000 workers at Spain's state-owned
postal service to join a 24-hour strike on Thursday against a
new law aimed at liberalising Spain's postal system, separate
from the austerity measures passed last month.
(Additional reporting by Jose Rodriguez in Madrid and Francesca
Piscioneri in Rome; editing by Sonya Hepinstall)