HispanicBusiness

Wilian Barragan considers himself fortunate to have a job in a country where the unemployment rate is close to 25 percent.

Although 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 1 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 Pampilln, 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 first quarter of 2012 from 22.9% in the fourth quarter of 2011.

"The reform hasn't benefited anyone," said Amelia Calvo, 59, who lost her job in a bank two years ago. "If there's no investment (by the government but only austerity measures), it's impossible to create jobs."

Barragan said his overtime has been cut and 40 of his co-workers have lost their jobs.

"They're putting pressure on us veteran employees to quit our jobs," he said.

Noted Pampilln, "The labor reform will only have results in the long term."

Rajoy predicted that 600,000 people will lose their jobs this year as a result of changes in labor laws. Yet still, the European Union said last week that Spain needs to reduce government spending by more than the $34 billion it is implementing this year.

Analysts say it is important that Spain makes an upturn. As the world's 12th-largest economy, its malaise if continued could have a rippling effect on the world economy. Economists from Brussels to Madrid are now talking about a possible Spanish eurozone exit as the country tires of cuts in public benefits.

Eleuterio de la Cruz, 49, came to Spain from Peru in 1998 during a construction boom. Unable to find work, he trained as a solar energy technician.

"All that I've studied is useless, there are no jobs," said de la Cruz, who sells fruit from a stand to make money. "Most of my colleagues from the construction days have returned to their countries."

The question now is whether the country can provide jobs for the 5.6 million unemployed. Pampilln doesn't think so.

"Spain has always been a country of emigrants," he said. "We emigrated after the discovery of America, during and after the Spanish Civil War. It's what we've got to do now."

Adrian Prieto, 25, can't find regular employment. Of 10 close friends, six are out of work.

"We survive because our parents support us and we get little jobs here and there. If I knew English, I would leave the country," Prieto said.