Spain's new conservative government approved sweeping labor market reforms on Friday as part of a drive to retool a sick economy and solve Europe's worst unemployment nightmare.

The decree gives companies hiring incentives such as cheaper severance packages and offers tax breaks for taking on young people. It does away with severance arrangements in which some workers got up to 45 days of pay per year worked, and lowered this to 33 days in most cases for new contracts, although the change is not retroactive.

Companies facing hard times will also be able to bow out of collective bargaining agreements reached with unions, and have greater flexibility to adjust working conditions such as schedules, workplace tasks and wages depending on how the economy and the company are doing.

A clause allowing companies to keep workers on temporary contracts with little benefits for up to three years will be changed to lower the span to 24 months. Nearly a third of the workforce in Spain is on temporary contracts, a huge percentage that makes the jobless rate tremendous volatile.

Small companies with 50 workers or fewer will get tax breaks of 3,000 euro ($3,986) for hiring people under 30 who are seeking their first job. Spain's unemployment rate is nearly 23 percent, for people under 25 it approaches a staggering 48 percent.

Deputy Prime Minister Soraya Saenz de Santamaria said one of the overall goals is to make layoffs a last resort for companies. Other European countries, notably Germany, have been able to stabilize unemployment by letting companies have employees work fewer hours for less money rather than firing them.

She called the reform package "major, far-reaching and complete." "It will mark a before and after in the labor legislation of our country," she said.

Passage came after a Cabinet meeting, in the form of a decree, which means it will go before Parliament for a yes-no vote, with no possibility of amendment.

Approval is guaranteed because the ruling Popular Party has an ample majority.

Spain's new conservative government has passed labor market reforms deemed crucial to creating jobs to chip away at Europe's worst unemployment nightmare and restore confidence in a sick economy.

Deputy Prime Minister Soraya Saenz de Santamaria said Friday that the changes are aimed at encouraging companies to hire young people, the long-term unemployed and people with dependents.

She said the package stresses, among other things, open-ended contracts and tries to limit temporary ones that are very common in Spain and make the country's workforce vulnerable to swings in economic growth.

Saenz de Santamaria said the reforms will "mark a before and after" in Spanish labor law. Passage came after a Cabinet meeting.

A portrait of a veiled woman cradling a wounded relative in her arms, taken in Yemen by Spanish photographer Samuel Aranda for The New York Times, won the top World Press Photo prize on Friday.

The photograph captured a moment in the conflict in Yemen, when demonstrators against outgoing president Ali Abdullah Saleh used a mosque in Sanaa as a field hospital to treat the wounded. But judges said it also spoke more broadly for the Arab Spring.

"The winning photo shows a poignant, compassionate moment, the human consequence of an enormous event, an event that is still going on," Aidan Sullivan, chair of the jury, said of Aranda's photograph, which won World Press Photo of the Year 2011.

"We might never know who this woman is, cradling an injured relative, but together they become a living image of the courage of ordinary people that helped create an important chapter in the history of the Middle East."

Reuters photographer Damir Sagolj won first prize in the Daily Life Singles category with his photograph of North Korea's founder, Kim Il-sung on a wall in Pyongyang.

Greek workers went on strike against austerity measures on Friday, docking ships and halting public transport, hours after euro zone finance ministers said Athens needed to make more cuts to convince them to release a financial bailout.

The euro and shares fell on Friday, reflecting concern over a possible failure in the debt restructuring after the European Union and International Monetary Fund indicated that a hard-won Greek deal on spending cuts and wage cuts did not go far enough.

The EU and IMF are exasperated by a series of broken promises by Athens and weeks of disagreement over the terms of a 130 billion euro ($172 billion) bailout, with time running out to avoid a default.

Before they release more aid, Greece's financial backers have demanded parliamentary ratification of the new austerity package this weekend, the identification of a further 325
million euros of spending reductions by next Wednesday and a strong commitment from all parties to implement the reforms.

But it may be a demand too far. Many Greeks, already suffering from five consecutive years of recession, are increasingly angry about the measures, which are unlikely to ease an economy, where one in five is unemployed, shops close one after another and households are tightening their budget.

The central Athens Syntagma square, in front of parliament, echoed with loudspeaker calls to rally against the measures: "No to layoffs! No to salary cuts! No to pension cuts! Do not bow your heads! Resist!"

Strikers brought the metro and buses to a halt, and ships were docked in the country's main ports in a 48-hour general strike, not long after another nationwide action on Tuesday.

Hospital doctors and bank employees also walked off the job and teachers were set to join on Friday. Flights were not affected by the strike, an airport official said.

"Tombstone"

"The measures included in the new (EU/IMF) memorandum and which the three political leaders agreed with the government and the troika are the 'tombstone' of the Greek society," the civil servants' union ADEDY said in statement. "It's time for the people to speak up."

ADEDY and its private sector sister GSEE represent about two million workers, or roughly half the country's workforce. They have staged repeated strikes since the country first resorted to a bailout from foreign lenders in 2010.

The two unions have called for protesters to rally in front of parliament. Turnout at protests has been relatively small over the past months and Friday's rally will be a test of the anger against the new austerity measures.

Facing elections as soon as April, Greece's party leaders have been loath to accept the lenders' tough conditions. After days of delays, and under threat of a messy default that could force Greece out of the euro zone, they agreed on Thursday to cut the minimum wage by 22 percent as part of efforts to make the economy more competitive.

Two sources said the government was also promising spending cuts and tax rises worth 13 billion euros from 2012 to 2015, almost double the seven billion originally pledged.

Jean-Claude Juncker, who chairs the Eurogroup of finance ministers in the euro zone, urged Greece late on Thursday to act on their promises. "In short, no disbursement before implementation," he told a news conference after six hours of talks in Brussels.

Germany's deputy finance minister, Steffen Kampeter, piled on the pressure on Friday, underlining the need for structural change in Greece - a comment echoed by European Commission President Jose Manuel Barroso visiting India.

"Obviously these political decisions are grim, but they are necessary because the alternative is giving them money without changes in behaviour, which neither the German parliament nor other euro zone parliaments will approve," he told local television.

Some Greek newspapers seemed to support the demands. "Greece's credibility is zero. That is why the troika (of officials from the EU, IMF and European Central Bank) is asking for written assurances and the voting of the implementation laws," financial daily Imerisia wrote in an editorial. "Let us decide ... if we want to continue being part of the euro zone or if we wish to walk down a dark path."

A customer of a local grocery store in the Spanish town of Chiclana de la Frontera, (Cadiz) in southern Spain found inside a bag of potatoes a hand grenade from the Second World War.

According to Spanish news agency Europa Press quoting police sources, the grenade was petrified and looked like a potato.

The same sources pointed out that the field where the potatoes had grown, somewhere in the French border with Belgium, had been a battlefield between 1939 and 1945.

The superstar Spanish judge who won global fame for aggressively taking on international human rights cases was convicted Thursday of overstepping his jurisdiction in a domestic corruption probe and barred from the bench for 11 years, marking a spectacular fall from grace for one of the nation's most prominent citizens.

Baltasar Garzon was unanimously convicted by a seven-judge panel of the Supreme Court. Because he is 56, the punishment could end his Spanish judicial career. Hours after the verdict, hundreds of Garzon supporters braved freezing weather in Madrid's central Sol plaza shouting "Shame! Shame!" in protest.

It was just one of three cases pending against Garzon, who is still awaiting a verdict in trial on the same charge, knowingly overstepping the bounds of his jurisdiction, for launching a probe in 2008 of right-wing atrocities committed during and after the Spanish civil war of 1936-1939 even though the crimes were covered by a 1977 amnesty.

In Thursday's verdict, the court ruled that Garzon acted arbitrarily in ordering jailhouse wiretaps of detainees talking to their lawyers, the court said, adding that his actions "these days are only found in totalitarian regimes."

Ironically, Garzon is best known for indicting a totalitarian ruler, former Chilean dictator Augusto Pinochet, in 1998, and trying to put him on trial in Madrid for crimes against humanity. He also indicted Osama bin Laden in 2003 over the Sept. 11 attacks.

The verdict came despite declarations by Spanish prosecutors that Garzon committed no crime. The charges against him stem from a complaint filed by lawyers who were taped in prison while visiting their clients. In a quirk of Spanish law, people can seek criminal charges even if prosecutors disagree.

Garzon took on cases using the principle of universal jurisdiction, the idea that some crimes are so heinous they can be prosecuted anywhere. He and colleagues at the National Court went on to champion the doctrine and try to apply it to abuses in far-flung places like Rwanda and Tibet.

Constitutional Court

Legal experts have said Spain's Constitutional Court, the country's highest court, probably won't accept an appeal of the judge's conviction, although Garzon's lawyer could try, or file an appeal with the European Court of Human Rights in Strasbourg, France, that would likely take years.

The lawyer, Francisco Javier Baena Bocanegra told the Cadena Ser radio network that Garzon was "suffering severely," but suggested he will appeal. "He is completely innocent," Bocanegra said. "We face a long road ahead, but we still have strength."

Garzon also said he was evaluating his appeal options without offering specifics, and vehemently denied breaking any laws. "I have worked against terrorism, drug trafficking, crimes against humanity and corruption. I've done it with the law in hand, together with prosecutors, judges and police," he said in a statement. "I have always strictly complied with the rules, I have defended the rights of defendants and victims in very adverse situations."

Human rights groups that hold up Garzon as a hero slammed the decision, saying he was targeted by critics who wanted to bring him down. "It looks like Garzon's enemies got what they wanted. Absent compelling reasons, the criminal prosecution of a judge for his judicial actions undermines the independence of the judiciary,'' said Reed Brody, a senior legal expert for Human Rights Watch.

Although Garzon enjoyed rock-star status among rights groups at home and abroad, he made many enemies in Spain, especially judicial colleagues uncomfortable with his celebrity and allegedly corner-cutting tactics in legal procedures, and conservative politicians who claimed he was more interested in fame than justice.

Civil war case

In the civil war case, the amnesty law came two years after the death of dictator Gen. Francisco Franco, the victor in the war, as Spain moved to restore democracy and rebuild after nearly 40 years of rule under Franco.

The civil war trial concluded on Wednesday, but that verdict is not expected for weeks. Garzon has been suspended from his job at the National Court since 2010 when he was indicted in that case.

Garzon faces more legal woes in Spain from a probe that could see him indicted over ties with a big Spanish bank that financed human rights seminars he oversaw while on sabbatical in New York in 2005 and 2006.

Thursday's conviction relates to Garzon's decision in 2009 to order wiretaps of jailhouse conversations between lawyers and detainees accused of paying off politicians of the now-ruling conservative Popular Party to obtain lucrative government contracts in the Madrid and Valencia regions.

Such wiretaps are permitted for terrorism cases, but Spanish law is more vague on non-terror cases. Garzon argued that he ordered the wiretaps because of suspicions the lawyers were being given instructions by the detainees to launder money.

Detainees' right to a fair defense

But the Supreme Court said Thursday that Garzon had no legitimate reason to suspect the lawyers, ruling that the wiretaps were not justified and violated the detainees' right to a fair defense.

The judges wrote that Garzon engaged in "practices that these days are only found in totalitarian regimes in which anything is considered fair game in order to obtain information that interests, or supposedly interests, the state."

In the civil war case, prosecutors also say Garzon committed no crime. Those charges stem from a complaint filed by two small right-wing groups.

After Garzon was indicted and suspended in 2010, he took a six-month job in The Hague at the International Criminal Court as an adviser to its chief prosecutor. After that, he accepted a position as a human rights adviser to the government of Colombia, which is fighting leftist rebels and powerful drug lords. So even if Garzon's career ends in Spain, he could presumably accept a similar position.

Protesters said Garzon's conviction was a major setback for Spanish democracy. "Spanish justice is shameful," said Diego Torrel, a 53-year-old railway construction worker. "It seems like we still have the same judges we had during the Franco era."

Espanyol and Athletic Club Bilbao are both looking for wins to leap into the Spanish league's Champions League places this weekend and overtake struggling Levante, which visits leader Real Madrid.

Levante was the early season surprise but its grip on fourth place has slackened after six league games without a victory. It is now tied on points with Espanyol and only two above Athletic Club Bilbao, which has lost just once in 13 matches overall ahead of Saturday's match at Real Betis.

The Basques reached its 36th Copa del Rey final on Tuesday following an emphatic victory over third-tier club Mirandes. With striker Fernando Llorente in tremendous form, the all-Basque squad coached by Marcelo Bielsa has a strong chance of playing in Europe's top-tier competition next season.

Llorente has scored 11 goals since returning from injury last month to lead a young squad full of budding Spain internationals, with Llorente and Javi Martinez already fixtures in the squad that won the World Cup.

Espanyol has brushed off injuries to forwards Alvaro Vazquez and Sergio Garcia to be unbeaten in seven league matches ahead of last-place Zaragoza's visit on Sunday.

"The second half of the season is always the most difficult, you have to manage situations of utmost stress,'' said Espanyol coach Mauricio Pochettino, whose team tailed off in the second half of last season. "We know any first-division team is capable of beating another. We've got great respect for (Zaragoza) as they are in a situation we have been through."

Zaragoza has only 12 points from 21 games this season to sit 11 points from safety. Last weekend's 2-1 home loss to Rayo Vallecano, when it surrendered a 1-0 lead, showed little indication the club is capable of staying up.

Levante was expected to be battling to stay up but a tremendous start put it top of the league for several rounds. The remains winless in 2012 before a trip to the Santiago Bernabeu, where Madrid has won nine of 10 games and its loss only to Barcelona.

Madrid could have Argentina forward Angel di Maria back from injury, but midfielder Sami Khedira remains out while utility player Hamit Altintop will be sidelined with a left leg injury.

Barcelona, meanwhile, is on the road at Osasuna on Saturday looking to pressure Madrid, which holds a seven-point advantage.

Barcelona beat Valencia 2-0 to secure its place in the cup final against Athletic Club Bilbao, also its 36th appearance, and can look forward to a league match with a much healthier squad, after Andres Iniesta and Alexis Sanchez returned from injury while Xavi Hernandez scored after being rested for two games. Pedro Rodriguez and Sergio Busquets also trained with the rest of the team on Thursday. "We're going to make sure the league is very long for Madrid,'' Barcelona defender Gerard Pique said on Thursday.

Third-place Valencia looks for its first league victory since December when it plays Sporting Gijon on Sunday, while new Sevilla coach Jose Miguel "Michel" Gonzalez begins with a match at Real Sociedad on Monday.

Spain's Supreme Court has found internationally known human rights judge Baltasar Garzon guilty of authorising the illegal recording of defence lawyers' conversations, a court spokesman said on Thursday.

The unanimous ruling disbars Garzon for 11 years. He cannot appeal against the ruling, the Supreme Court said.

The case is separate from one currently in progress in which Garzon is accused of illegally ordering an inquiry into tens of thousands of suspected murders by forces loyal to Francisco Franco.

The case involves allegations he illegally authorised police investigating a corruption case to record the conversations of lawyers with their clients in custody. Garzon told the court he had authorised the taping of conversations of defendants in custody only because lawyers were suspected of involvement in money laundering.

It was brought by two businessmen who are awaiting trial for allegedly bribing members of the centre-right People's Party (PP), which won a landslide election victory in November. "The conversations were taped...for a concrete and specific reason, that had nothing to do with their defence preparation," Garzon told Spain's Supreme Court. "All and every measure was taken to protect the right to a (fair) defence."

Police have arrested a presumed member of the armed Basque group ETA in Bilbao, Spanish news agency EFE reported on Thursday quoting police sources.

There was an arrest warrant issued by Spain's High Court for the suspect, identified as Juan Francisco Gómez López.

According to the same sources, the detainee had been arrested previously in 1989 when he was planning an attack on a Spanish police patrol.

Fitch Ratings has downgraded Caja Laboral Popular's (Caja Laboral) Long-term Issuer Default Rating (IDR) to 'BBB+' from 'A' and Viability Rating (VR) to 'bbb+' from 'a'. Fitch has removed the Rating Watch Negative (RWN) on its Long-term IDR and the Outlook is Negative.

Fitch believes that it will become increasingly challenging for Caja Laboral to sustain profitability and asset quality metrics given the expected deterioration in Spain's economic outlook and the severely strained state of the country's real estate market.

Caja Laboral's focus on the relatively more resilient Basque Country and Navarra regions, a 12% Fitch core capital ratio(FCC)/weighted risks (end-Q311) and an exposure to real estate and construction lending (11% of total loans and foreclosures at end-Q311) that is below the sector average partly offsets these risks, but do not mitigate them fully.

Caja Laboral's exposure to land is high at 6% of total loans and foreclosures at end-Q311 and it was 25% covered by reserved, which in Fitch's view is under reserved. Fitch estimates that the recently announced tougher provisioning requirements of the Spanish Ministry of Finance should they have been taken through equity and profit and loss at end-Q311, would have resulted in a FCC ratio of around 10%,which still remains strong.

The bank's operating profit and its below-peer net interest margin, in part a reflection of there being no interest rate floors in its mortgage loans, will continued to be under pressure as economic conditions toughen and further asset quality deterioration continues. The bank's large residential mortgage portfolio (64% of total loans) has performed well to date, with non-performing loans of just 1.5% versus a 2.7% average for peers.

Caja Laboral's ratings also consider its solid franchise in the wealthy Basque Country and Navarra which has provided it with a large and relatively stable retail funding base. They also reflect Caja Laboral's adequate liquidity with no wholesale funding maturities in 2013, limited European Central Bank reliance to date and unencumbered assets pool of around 9% of total assets at end-Q311.

The Support Rating of '3' and Support Rating Floor of 'BB' reflect Fitch's belief that there is a moderate probability of support from the Spanish authorities if needed, in light of Caja Laboral's importance in the Basque Country.