The Spanish government has approved key changes to the labour market in a bid to chip away at a 21 per cent jobless rate and reassure investors worried about the slow economic recovery.

The reform package was approved as an emergency decree at a Cabinet meeting Friday, but it will be opened up for debate in Parliament and possible amendments later this year.

The government is acting after months of talks between unions and business leaders collapsed. Both sides have criticised parts of the government package, which changes collective bargaining rules.

But Deputy Prime Minister Alfredo Perez Rubalcaba said Friday it strikes a balance between the two.