The new agreement leaves Spain with the seventh highest minimum wage in Europe. | EFE -

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Spain will increase the national minimum wage by 3.6% to 1,167 euros per month, Labour Minister Yolanda Diaz said on Wednesday, marking the fourth such hike since the left-wing coalition government came to power in 2019.

The wage hike will be applied retroactively from Jan. 1, Diaz told reporters after agreeing the rise with unions.

Spain's business associations did not back the move but will have to comply with the increase, which is the latest step in the government's plan to bring the minimum wage to 60% of the average national salary of 1,944 euros per month.

Calling the increase "a very important milestone", Diaz said that seeking to compete with other nations by pushing down salaries in the past had led to a weak economy and precarious businesses, and was profoundly unjust.

"We want to compete on the axis of productivity and not on the axis of low wages," she said.

The new agreement leaves Spain with the seventh highest minimum wage in Europe, according to European Union data, well ahead of neighbouring Portugal, which offers 705 euros a month, but lagging far behind France's 1,603 euros.

Last week, Spain's fragmented parliament approved the government's labour reform by a margin of just one vote, overturning a previous conservative administration's pro-business reforms by granting more power to unions in bargaining contracts.