Investors will be watching closely as the legislation also marks the latest stage in a concerted campaign by Madrid to persuade markets it can slash its public deficit and iron out structural weaknesses in an economy that is heading back into recession.

The centre-right government, elected in a landslide in November, is prepared on Friday to go further with its reforms than a labour pact reached between unions and business leaders at the end of January – even if that risks provoking a general strike.

Workers and management agreed to give more power to companies to hire and fire, reduce the cost of layoffs, and untie wage agreements from inflation.

The government has said it also wants to give firms the ability to modify workers’ hours in response to demand rather than simply laying them off, bringing an end to the rapid rise in temporary contracts that has helped push youth unemployment to just shy of 50 percent.

But it is unclear if that reform will be part of Friday’s programme, and even if it is, the consensus is that a jobless rate now close to 23 percent will not come down any time soon.

“I think the reform will only go half way. That’s a shame, because it is necessary, even if it’s hard to explain to society,” Fran Gonzalez, economist at Caixa Catalunya, said.

Sources close to the government told Reuters there is a split between those who do not want the reform to be so deep that it brings about a breakdown in relations with labour unions, and those – said to include Economy Minister Luis de Guindos – who want something more radical.

As things stand, analysts believe a desire to retain voter support ahead of upcoming local elections in heavily populated Andalucia and the northern region of Asturias mean de Guindos could lose out.

“The problem is that the government faces elections in the short term… Right now it’s not looking like we’ll see the radical reform that Spain needs,” said Jose Pin at the IESE business school.

“We’ve got 23% unemployment, so you need to reduce it fast. If the reform is radical the economy will breathe and unemployment will be reduced much faster.”

NO JOB CREATION YET

The previous Socialist government reformed labour rules in 2010, but the changes were widely criticised for not tackling the collective bargaining wage-setting process or delinking salaries from consumer prices.

Prime Minister Mariano Rajoy acknowledged on Wednesday that the difficult economic environment – Spain is facing its second recession in under three years – meant job creation is still a long way off.

“Unfortunately the figures will not improve this year… They are going to get worse,” Rajoy told Parliament.

A day earlier, Employment Minister Fatima Banez said the reform would try to end Spain’s dual track employment system.

As things stand, an older generation of workers with robust benefits are very expensive to let go, and a younger generation in so-called “junk jobs” or hired on temporary contracts have no benefits or job security.

The government is expected to legislate on collective bargaining agreements in an attempt to give firms more power in setting wages according to their economic circumstances rather than across entire sectors as happens at present.

It will also likely reduce the number of days of severance pay a firm has to pay from a maximum of 45 per year worked at present, with unions hoping for it to be taken no lower than 33, and business leaders hoping for 20.

Another likely element will be incentives for firms to hire youth workers.

STRIKE RISK SEEN ACCEPTABLE

Rajoy has long said he expects the reform to trigger at least one general strike, and his advisers say if that doesn’t happen the reform is too soft.

Fernando Lezcano, spokesman for the CCOO labour federation, said the contents of the reform would determine whether a strike takes place, criticising the government for not working with labour more closely on the reform.

“The government seems worried about satisfying the demands of financial institutions and (German Chancellor) Angela Merkel, while it refuses to enter into dialogue and share information with Spain’s social partners,” he said.

But if there is a strike, the high unemployment rate may well keep it from gaining mass backing.

A survey by pollster Sigma Dos published in El Mundo newspaper on Tuesday showed 65 percent of people would accept a full-time contract with a 20-day severance package.

Analysts say the real proof the reform is working or not will come in October. The Spanish tourist and service sectors create jobs at a fast rate over the summer months, and analysts say that if there are fewer lay-offs in October after the season ends then it would be a sign the labour reform was working.

El País today

El Mundo headlines ‘Garzón expelled for acting like the judges of ‘totalitarian regimes’.
El País headlines ‘The Supreme Court does away with Garzón’, noting that the tribunal has sentenced him to 11 years of out of office for perversion of the course of justice. The paper notes that Garzón has said in a note – ‘I fully reject the sentence’.
El País has an opinion poll from Metroscopia which says that six out of ten Spaniards think the judge suffers a ‘persecution’.
ABC headlines – Garzón – Banned 11 years because of his totalitarian methods.
La Razón headlines, Garzón – Justice for the justice giver. It says the Supeme Court has banned the judge or 11 years for ordering the illegal Gürtel recordings and acting like ‘in totalitarian regimes’. It notes that Garzón has responded saying the case had been an excuse to eliminate him, while the General Council for Judicial Power has criticised the politicians who have questioned the sentence. It notes demonstrators in Madrid last night who questioned the independence of the General Council for Judicial Power.
Público has the headline ‘Ajusticiado’ – executed.
It says the Supreme Court has condemned Garzón to 11 years out of office for restricting the right of defence of the allegedly corrupt in the Gürtel case. Garzón has responded that his rights have been ‘systematically violated’ and he ‘fully rejects’ the sentence. It notes the left wing criticise the sentence, while the right applaud. Progressive jurists consider that the decision will have ‘harmful effects’ on the judiciary.

La Razón says that the Government will make 33 days pay per year worked for redundancy the norm, and will make 20 days easier to apply.

El Mundo reports that in the Campeón Case, the Supreme Court has ordered the police to investigate the assets of ex Development Minister, José Blanco. Judge Soriano has asked for the evidence from the Economic Crimes unit of the police for a possible crime of bribery and influence peddling.

El Mundo says the Royal Household has asked the judge that the Duke of Palma does not walk to the court to declare in the Nóos case. It has asked that on February 25 he does not go to the court by foot, but be granted access to the building by car ‘to preserve his privacy’.
La Razón notes that the Infanta Cristina has visited the King and Queen in the Zarzuela palace.

La Razón says that José Antonio Griñán has shared out nine times more to the PSOE unions than to the Red Cross.

In international stories,
El País says that Greece has accepted the demanded cuts to avoid bankruptcy. It says Athens is awaiting the approval of the rescue package.
ABC however says that the EU lacks confidence in Greece and has asked for more guarantees.

La Razón today

El Mundo says that Rajoy has buried the ‘green shoots’ and told the chamber that the situation could not be worse.
ABC has a headline quote from Rajoy to Rubalcaba – ‘Luckily you are no longer in the Government’. The paper also notes that the labour reform will stop the automatic extension of wage deals.
La Razón shows Rajoy in Congress and headlines ‘Rajoy’s truths’. It lists five – Unemployment will get worse in 2012, the labour reform will be wide and deep, the deficit will not be below 8% of GDP, the approved bank fusions are hardly viable, and the reforms are our best visiting card in the EU.
Público shows Rajoy and has the headline – ‘2012 a year lost’. The paper says Rajoy has admitted that his labour reform will not create jobs this year.

El Mundo reports that the retiring President of Extremadura, the Socialist, Juan Carls Rodríguez Ibarra, approved his own early retirement deal complete with a bonus, before he left power.

The Infanta Cristina is photographed in Barcelona in El Mundo and is, according to the paper, ‘worried’ and preparing the defence of her husband.
El País headlines that the Judicial Power is investigating the judge who has indicted Iñaki Urdangarin. The paper says the disciplinary commission has started investigating alleged leaks.

El País says that the National Court has implicated 13 directors for alleged corruption in the visit of the Pope to Valencia. It’s part of the Gürtel corruption case.
Público says it is linked to the Canal 9 coverage of the Pope’s visit in 2006.

La Razón says that the Ministry for Development will pay travellers in cases such as Spanair. Ana Pastor is to announce a letter of rights today.

ABC notes that 100 towns and villages in the Basque Country are not flying the Spanish flag from their Town Halls. It says the State Bar will take action against those who break the law on flying flags.

El Mundo says that Rodrigo Rato told Mariano Rajoy on January 20 that he did not want a merger with Caixabank. The paper also notes that the CAM lost 2.7 billion € last year. The savings bank was intervened in by the Bank of Spain in July.

El Pais says the spending cuts in Cataluña have resulted in a two speed health service. Most public hospitals are renting out their theatres to the private sector to compensate for a lack of income.

Público notes that Judge Garzón has claimed he acted in the Franco disappearances case to ‘avoid forget’.

In international stories,
El País notes that the Eurogroup is meeting today to unblock the second rescue package for Greece. The paper says agreement seems closer.

El País also reports on the continued fighting in Syria and notes that a suburb of Damascus has become the symbol of the rebellion.

ABC toady

El Mundo has a photo of the rider and says the TAS has punished him without knowing what happened. The paper has an editorial entitled ‘Presumption of guilt’.
El País says that Alberto Contador is dethroned for doping. The two year sanction means he loses his Tour de France and Giro de Italia wins.
La Razón says the TAS has punished the Spanish cyclist with two years of sanction, the highest possible without having conclusive proof.
Público says the supreme sports court has imposed two years of suspension on the Spaniard for doping in the 2010 tour.

El País headlines that the imminent labour reform has opened cracks in the Government. Guindos wants to see a tougher reform than the one defended by Montoro.
ABC says the Rajoy cabinet will allow sacking with 20 days compensation per year for companies in crisis.

El Mundo reports on a survey from Sigma Dos which says that 65% of the unemployed would accept a contract with 20 days per year worked redundancy pay. Also 63% of the unemployed aged under 30 would accept the so-called ‘minijobs’ and 56% say they are prepared to work for below the minimum wage.

Público notes that victims of Franco have denounced to the Supreme Court how they have been abandoned by the judiciary. It comes as the case against Judge Baltasar Garzón continues.

El País says that new PSOE leader Alfredo Pérez Rubalcaba is imposing discipline for a single speech across the country.

La Razón headlines that Patxi López will give as much as 390,000 € to the ‘victims’ of the police. The Basque Government is drawing up a new decree to repair the ‘unjust suffering’ produced by political violence between 1968 and 1978.

Many papers say goodbye to Spanish artists and sculptor, Andoni Tàpies. El Mundo puts him on its masthead describing him as the maestro of abstraction.
El País says that the ‘poet of material’ has died in Barcelona aged 88.
ABC dedicates its front page to him and with a large illustration says ‘Tàpies, goodbye to the great renovator of Spanish art.
Público has a photo of the artist and says that the at the age of 88 the Catalan painter, a universal reference of contemporary art, has died.

In international stories,

El País reports from Homs in Syria, which they say has now become a cage for thousands of people who are trying to remain alive.

Público notes that the EU is putting pressure on Greece to speed up its reforms. It notes Athens has announced the sacking of 15,000 people from the administration.