NOVE SADY, Slovakia (Reuters) - Slovakia's center-left government backed up its electoral pledges to fight for the common man by passing a new labor code on Wednesday that makes it harder for companies to fire workers and gives more protection to contractors.
Free marketeers and business figures say the new law will dent labor market flexibility, sour investment and harm job creation in the country of 5.4 million, whose cheap labor and reforms over the past decade have made it a hub for car and electronics factories.
Manufacturing growth in recent years has helped the small euro zone member weather the economic downturn and Slovakia is projected to be the fastest-growing economy in the currency bloc this year.
That has been backed up over the past decade by pro-business legislation that has steadily rolled back the bureaucracy and pro-labor regulations of the pre-1990 communist era.
But like elsewhere on a European continent that has failed to meet ambitious targets set in 2000 for catching up with the United States on labor productivity, the new bill is evidence of the political barriers to further liberalization.
Slovakia dropped five places to 48th out of 183 economies monitored in the World Bank's most recent Doing Business survey, which measures the regulatory environment for entrepreneurs.
The legislation would strengthen overtime pay and renew severance for workers on the job for more than two years that are fired or leave for health reasons.
It also limits the amount of time and times a firm can hire a temporary worker, while contractors would receive most benefits that full-time workers get.
The proposals, due to come into effect next year, will head next to parliament, where Prime Minister Robert Fico's government holds a safe majority.
Fico swept to power in March this year on a pledge to bring Slovakia's fiscal budget in order at the expense of the rich and without costing the poor.
To date, Fico's leftist government has made good on that promise, focusing austerity measures on the better off, hiking taxes on the wealthy and on companies, imposing special levies on banks and reclaiming funds from private sector pension providers.
But the government said last week it would need more austerity steps to help it meet a goal of cutting next year's budget deficit to under 3 percent of economic output.
(Reporting by Jason Hovet via Prague newsroom; editing by Patrick Graham)