MADRID — Wilian Barragan considers himself fortunate to have a job in a country where the unemployment rate is close to 25%.
Although he has been working at a private security company for five years, he recently visited the unemployment office to see what he'd get if he gets laid off.
The job "is hanging by a thread," said Barragan, 45.
Spain's economic misery will get worse this year despite the country's request for a European financial lifeline to save its banks, Prime Minister Mariano Rajoy said Sunday. Eurozone finance ministers said Saturday they are prepared to lend up to $125 billion.
The banks' problems are losses in a real estate crash, but Spain's job woes are due largely to labor laws that protect older workers at the expense of younger ones, business experts say. Things won't change until Spain fixes the problem, they say.
"The unions have enjoyed a social prestige and power that was not seen anywhere else in Europe," said Mariano Guindal, a business analyst and author of a book on the pitfalls of the Spanish economic system, The Days We Lived Dangerously. "They were very politicized and were very protectionist of those who had jobs, but they didn't think about the jobless."
Spain did not spend wildly beyond its means like Greece, which is mired in debt, nor did it loosen up mortgage regulations like in the United States, which made real estate lending riskier. But Spain over the years has been hampered by a highly inflexible labor market that makes it difficult for companies to adapt to changing economic conditions.
For decades, Spain was under the dictatorship of Francisco Franco, who banned unions and ignored worker demands. When the regime fell in 1975, Spain began passing laws to protect worker security and make it difficult for companies to modify the jobs of employees or lay off workers to survive poor economic times.
Governments also required companies to provide boosts in pay and benefits. As a result, older workers keep their jobs with high salaries in industries that can't modernize and compete, and younger workers aren't being hired because companies fear they cannot afford them in the long term.
The numbers tell the story. Spain's unemployment rate for younger workers, many with college degrees, is nearing 50%.
European financial ministers recognized the problem as a drag on the eurozone, the 17 nations that use the euro as currency. The European Central Bank and others pressured Spain to act.
In February, Spain passed changes, such as a reduction in severance paid to laid-off workers that companies said was preventing them from firing older workers or hiring new ones. A worker with 10 years experience, for example, could have gotten 45 days pay for every year worked — forcing a company to pay more than 1½ years of salary to lay the person off. The changes reduced it to as few as 20 days' pay per year worked under certain conditions, and allowed companies to reduce salaries or relocate jobs and plants, something they could not do before.
The overhaul is purging the system of inefficiencies, and if it is easier to lay off people, it should be easier to hire them, some observers say.
"Spain is shifting from a low-productivity economy to the development of sectors that are technologically advanced," said Rafael Pampillón, head of economics at the Instituto de Empresa business school in Madrid. "The aim of the reform is to provide less rigid laws, to make our system more similar to our neighbors."
However, nearly four months since the changes were ushered in, job creation in Spain is actually getting worse. Spain's unemployment rate — the highest in the 17-member eurozone — rose to 24.4% in the