* Spanish among least likely to move for work in EU
* Rigid labour, rental markets impeding mobility
* Immigrants helping by moving to other sectors, regions
* Better labour mobility could strengthen weak recovery
By Nigel Davies
MADRID, Feb 1 (Reuters) - Spain is taking steps to help jobseekers move to find work as part of efforts to drive down persistently high unemployment, but it must still do more to help a bricks-and-mortar-based economy find new growth engines.
Having made hiring and firing cheaper under hard-won labour reforms that also placated jittery investors, the government now faces the challenge of thinking up new incentives for one of Europe's most stay-at-home workforces to spread its wings.
Jobless rates vary widely across Spain's 17 regions, but cultural and language issues, as well as an ailing property market that has left many homeowners with negative-equity mortgages, means those in high-unemployment areas prepared to improve their chances elsewhere are the exception rather than the rule.
"Spain would benefit in particular now from enhanced geographical mobility of workers," said Anita Woelfl, economist at the Organisation for Economic Cooperation and Development.
"It would help to absorb and reallocate the unemployed across sectors and regions and speed up the adjustment of employment to the crisis."
A Eurobarometer report by the European Commission in June showed mobility intentions among Spaniards were well below the European average, with 57 percent saying they didn't want to move abroad, compared with an EU average of 39 percent. OECD data show Spain's internal mobility was also very low.
Spain has the highest unemployment rate in the euro zone at 20 percent, climbing as high as 30 percent in poorer regions like Andalusia.
Even so, those out of work often discount regions like the Basque Country in northern Spain, where unemployment is half the national average.
Analysts think the increasing use of Basque, Catalan and Galician in those regions' schools and businesses discourages Spaniards from elsewhere from moving.
Graphic on Spain labour market growth by sector:
http://r.reuters.com/jum77r Graphic on Labour mobility: http://r.reuters.com/num77r
TIED TO HOME
Prime Minister Jose Luis Rodriguez Zapatero said in January that cutting red tape linked to business practices through the regions was essential to boosting competitiveness.
But Spain's property boom-and-bust has created another barrier, with people burdened with high levels of household debt and mortgages. Mortgage volumes rose last November to 1.085 trillion euros from 261.7 billion in 2000, while transaction fees on property are among the highest in Europe. Another obstacle to labour mobility is the rental market, which accounted for 13 percent of the housing market in 2009.
The government ended tax breaks on mortgages at the start of the year, meaning buying and renting now both receive the same tax treatment.
But landlords still often demand between six months' to a year's rent up-front to ensure tenants pay up in tough economic conditions, analysts note.
And government plans to extend the labour reform by changing a collective bargaining system that has been blamed for making Spanish workers uncompetitive have yet to be implemented.
Meanwhile, Woelfl of the OECD welcomed the relaxation of the hiring-and-firing rules a first step to help improve mobility and tackle the issue of youth unemployment that tops 40 percent by narrowing the discrepancy between mostly older workers on permanent contracts and younger ones on temporary deal.
"Recent reforms really have the potential to improve the labour market - to make it more flexible, to reduce unemployment quicker than before across regions, but also to make the market much stronger to withstand shocks," she said.
EDUCATION REFORMS
Labour and house markets reforms may not be enough, though.
"The big outstanding reform ...is education," said Emiliano Carluccio, economist at Carlos III University in Madrid.
"We can't expect those young people who haven't finished secondary school to leave the construction sector to suddenly work as engineers or as software developers," he said.
Spain plans to open vocational learning centres through the country in an attempt to re-train young workers, and help them move more freely.
Spain has a secondary school dropout rate of around 30 percent, but also a high level of university graduates that offers a source of optimism for relocation industry experts.
"This (lack of willingness to move for work) is changing rapidly," said Elaine Hery director of ERES Relocation company, also noting increasing numbers of youngster ready to move abroad either to work or to improve marketable language skills.
"My aunt is Belgian and she's always telling me to come there as they're looking for nurses like crazy. And here there's nothing but rubbish part-time, month-by-month contracts," said Aura Vila, 31, who is looking for work in hospitals near Barcelona.
Meanwhile, in at least one respect immigrants may be showing locals the way ahead.
The number of foreigners living in Spain rose by around five million between 1999-2009, with most entering work in the construction sector that tied them to growth areas on the coast.
But according to Eurofound, an EU body aimed at improving working and living conditions, many are now moving to new regions to work in agriculture.
(Additional reporting by Sarah Morris; Editing by John Stonestreet)