February 5, 2020 / 8:22 AM / 22 days ago

ECB's de Cos warns Spanish government against rolling back labor reform: FT

MADRID (Reuters) - Spain’s central bank chief Pablo Hernandez de Cos warned the Spanish government against rolling back labor reforms and called on the European Central Bank to set a clear inflation target of 2%, the Financial Times reported on Wednesday.

Hernandez de Cos, who sits on the ECB’s governing council, said the scrapping of the reform approved by a previous Spanish administration in 2012 would hurt the country’s competitiveness, the Financial Times said.

Since emerging from a severe financial crisis in 2013, the Spanish economy has created millions of jobs and outperformed it euro zone peers. Many economists consider the reform, which made it easier for companies to fire workers and drove down wages, was crucial for the recovery.

“Since it is so difficult from an empirical analysis to disentangle all these changes [put into places by the labor reform]... if you just touch one, you do not know what the consequences will be,” the Financial Times quoted de Cos as saying.

Scrapping the labor reform is a key policy announced by the new left-wing government that was sworn in last month.

De Cos also criticized the government’s decision to raise the minimum wage by 5.5% this year on top of a 22% increase last year, saying it would hurt people with lower productivity.

And he advocated that the ECB set a clear 2% inflation target instead of the current less precise goal of an inflation rate “below but close to 2%”, the newspaper reported.

(This story corrects to removes extraneous word from headline)

Reporting by Inti Landauro; Editing by Alex Richardson

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