* 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 (Reuters) - 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 legislation.
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. [ID:nLDE6581SK]
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.
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 Reuters.
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. [ID:nLDE6590SA]
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 talks.
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)