Spain vows to resist strikers' demands to reverse labour law

Spain's government vowed to stick to its labor overhaul, defying union leaders who threatened further unrest after staging the first general strike since Prime Minister Mariano Rajoy took office three months ago. Iberia, the Spanish unit of International Consolidated Airlines Group SA, canceled 65 percent of its flights, while national power demand was about 17 percent below usual, grid operator Red Electrica Corp. SA data showed. Unions said 77 percent of workers took part, more than during a walkout in 2010, even as the People's Party government said fewer workers stayed home than last time. Shops, restaurants and banks in central Madrid opened as usual. While Rajoy's measures have angered unions and undermined support for the party in a regional election on March 25, the government is still struggling to convince investors it can cut debt and reduce a 23 percent jobless rate. Spain's extra borrowing costs compared with Germany's increased to the most in more than three months today, surging 65 basis points from the start of March. "The reform agenda of the government is unstoppable," Labor Minister Fatima Banez told reporters in Madrid. No Choice Spanish 10-year bond yields rose to 5.46 percent, compared with 5.33 percent yesterday. The Ibex 35 share index fell 0.9 percent, extending its loss for this year to 7.7 percent. "If he gives in, the markets will punish Spain," said Antonio Barroso, a political analyst at Eurasia Group in London and a former government pollster. "Rajoy has his back against the wall," he said. "He has no choice." Union leaders said they would continue to fight the government until it changes tack. The next date for protests may be May 1, Ignacio Fernandez Toxo, secretary general of the Comisiones Obreras union, told a news conference in Madrid. "Social conflict is going to rise," he said. "We won't stop until the government substantially changes the reform." The government, in power since Dec. 21 and backed by the biggest majority any party has enjoyed in Parliament since 1982, presents its budget tomorrow. Rajoy has said the spending plan will be "very austere" as the nation aims to slash its deficit by a third even as the economy contracts. Graffiti, Stickers On average, 77 percent of Spaniards joined the strike, with the rate rising to 97 percent among industrial workers, said Candido Mendez, the head of the Union General de Trabajo. Among central-government workers, 17 percent joined the strike, said Cristina Diaz, a director general at the Interior Ministry. As protesters in Barcelona set fire to dumpsters, Diaz said 176 people were arrested by police across the country. Fifty- eight police officers were injured in scuffles and 46 civilians were hurt, she said. After the working day, demonstrators marched towards Puerta del Sol in Madrid in support of the strike. Shops, restaurants and banks, their windows plastered with stickers reading "closed for the strike," opened as usual in central Madrid. Pro-strike slogans were spray-painted on banks' windows and stickers obstructed cash machines. Piles of garbage were left uncollected and union fliers covered the sidewalks. Police in riot gear stood guard outside the headquarters of the ruling People's Party. 'Immense Majority' CEOE, the business lobby, said while industrial workers stayed home more than others, "the immense majority" of Spaniards had gone to work. State broadcaster RTVE had a reduced service, re-running old documentaries in place of its usual breaking news service. Flights in and out of the country were also disrupted. Barcelona, which drew 0-0 at Milan in a Champions League soccer match last night, will remain in Italy until tomorrow to avoid the effects of the strike, a team official said by phone. At the last general strike in September 2010, which was also called to protest changes to labor rules and austerity measures, 72 percent took part, according to the unions. The former Socialist government said the impact was "moderate," with participation rates ranging from 7.5 percent in the public sector to 100 percent in the automotive industry. The latest labor overhaul goes further than the attempt by the Socialists to reduce the European Union's highest jobless rate, which amounts to 50 percent among young people. The bill makes it easier to cut wages, reduces unions' negotiating power and allows for lower firing costs.