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Spain May Deepen Labor Overhaul to Reduce Jobless: Rajoy

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Worker on the Beach
A worker prepares lines of sun loungers for visitors on the beach at Sitges, Spain. Photographer: David Ramos/Bloomberg

Sept. 26 (Bloomberg) -- Spain’s government may deepen the overhaul of labor laws that prompted a general strike last year after taking advice from the Organization for Economic Cooperation and Development, Prime Minister Mariano Rajoy said.

Speaking in an interview with Bloomberg Television, Rajoy said the government is assessing the impact of the 2012 overhaul and will submit the review to the OECD. The Paris-based organization has repeatedly proposed more radical steps to reduce the country’s 26 percent unemployment rate, such as moving toward a single contract for all types of job.

“If it were necessary or useful to do a touch-up so that things worked better, have no doubt that we would do it,” Rajoy said in New York yesterday.

Rajoy said the Spanish economy is emerging from its two-year recession and the government doesn’t plan additional austerity measures as it’s confident it can meet this year’s deficit goal of 6.5 percent of gross domestic product. Lower borrowing costs will make it easier to comply with that target, while the government will revise down the 2012 shortfall this week to 6.8 percent from 7 percent, excluding the cost of bailing out banks, Rajoy said.

“Next year it will be easier to reduce the deficit because there’ll be more growth so more income,” he said.

The government continues to work to lower its borrowing costs, after its five-year bond yield fell by a third in the past 12 months, while a weaker euro would add further fuel to the nation’s export boom, Rajoy said.

“If the exchange rate was somewhat lower there’s no doubt that would be better for Spanish exports,” he said.

The yield on Spain’s 10-year bonds climbed to 4.306 percent as of 9:30 a.m. Madrid time. That compares with a euro-era high of 7.75 percent in July 2012, before European Central Bank President Mario Draghi pledged to “do what it takes” to hold the euro together.

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; Sara Eisen in New York at seisen2@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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