May 31, 2010 / 7:40 AM / 7 years ago

Corrected: Spain gov't preparing own labor reform plan: report

<p>The red shadow of a union flag is cast on the face of a demonstrator blowing a whistle during a protest against planned pay cuts of civil servants in front of the economy ministry in Madrid May 20, 2010.Andrea Comas</p>

(Corrects lead paragraph to make clear El Pais says the

government is close to giving up, rather than has given up. Adds

quote in paragraph three and fixes headline)

MADRID (Reuters) - Spain's government has almost given up on securing a deal with unions and employers on a reform of rigid labor market rules and is preparing its own plan, newspaper El Pais reported on Monday without citing sources.

A deadline for the government to agree a labor reform deal with unions and employers had been set for Monday, but the labor ministry said on Saturday it had extended it by a week.

"The government has almost lost all hope of reaching a deal with unions and the employers' association over the labor reform. Today, they are meeting ... with very few expectations of success," the newspaper said.

Under plans being mulled by the government, left-leaning daily El Pais said companies would have the possibility to make greater use of cheap work contracts for a broader range employees.

There was no immediate official government comment on the El Pais report.

At the moment, special contracts allow some workers to be hired on the basis of reduced redundancy payments -- 33 days of salary per year worked instead of the normal 45 days -- in the event they are later fired.

The government would try to extend this through a legal decree that would have to be voted on in parliament, but which would not allow opposition lawmakers to table amendments.

Imposing a deal without the agreement of the unions would likely set the ruling Socialists on a collision course with their traditional allies.

Spain's two largest unions have threatened a general strike if the government tries to impose labor reform.

Companies in Spain have long complained that burdensome hiring and firing costs are a disincentive to recruiting workers, exacerbating the government's high unemployment rate which has hit 20 percent.

Reporting by Sarah Morris; Editing by Sonya Hepinstall

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