Slovak parliament approves law boosting unions

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Slovakia's leftist government pushed through parliament a law boosting the powers of trade unions on Friday, despite heavy criticism by opposition MPs and employers who fear the move threatens economic competitiveness.

The law on consultations between the government, employers and trade unions sets formal rules for the social negotiations, and can order private companies to raise wages.

The legislation is part of Prime Minister Robert Fico's drive to increase the protection of employees, which was among the main campaign promises that helped him beat the previous reformist cabinet in a June 2006 election.

Slovakia has been a favourite spot for foreign investors in recent years, thanks to low taxes, its location in central Europe, and its cheap labour force.

The most criticised part of the new legislation is a clause that will force companies to accept nation-wide collective agreements between trade unions and employers associations even if they did not agree with, nor sign such deals.

"This law will prevent social dumping," Social Affairs Minister Viera Tomanova told MPs during the debate.

The Republic Union of Employers, which includes companies that account for some 70 percent of the country's gross domestic product output, said the disputed clause violated the terms the cabinet, unions and employers agreed on while preparing the law.

Opposition deputies also slammed the law during heated debate.

"Regional differences cannot be solved by dictating to employers to raise wages," said Iveta Radicova, a former Social Affairs Minister in the previous centre-right government.

The ex-communist EU member has attracted large investment projects, like car assembly plants by PSA Peugeot Citroen and Kia Motors , and a number of smaller car parts makers supplying to the booming automotive industry.

Analysts said flexible job market rules were an important lure for investors, and the new law could make it tougher to reduce the current unemployment rate of 9.4 percent.

"The intention of the law was the protection of employees, but we think that the effect may be the exact opposite," said Peter Golias, an analyst at an independent think-tank INEKO.

"It can complicate the operations of companies, increase their costs and possibly lead to lay-offs," Golias said.

[BRATISLAVA/Reuters/Finance.cz]