Spanish Prime Minister Jose Luis Rodriguez Zapatero.

Spain's government is to approve a plan to combat the country's black economy, which represents almost one quarter of its economic output, Prime Minister Jose Luis Rodriguez Zapatero said Wednesday.

“In the month of April we are going to put in place a plan that will be approved by the cabinet aimed at making a special effort to legalise underground employment,” he told parliament, confirming measures announced at last week's EU summit in Brussels.

“So that it is effective, this plan ... will include a toughening of sanctions for the heads of companies.”

The government will give companies until the end of 2012 to cease employing illegal workers, before enforcing the new measures.

“The existence of a potential market in illegal employment clearly prejudices the whole of the Spanish economy, for companies that respect the law because they find themselves faced with unfair competition and for employees who do not pay contributions because they are deprived of social and labour protection,” the prime minister said.

According to the most recent figures released by the Gestha union of tax inspectors, the black economy represented 23.3 percent of Spain's economic output in 2009, or 244.9 billion euros ($344.7 billion).

The association of Spanish savings banks estimates that some four million people work in the black economy, while Spain's unemployment rate soared to 20.33 percent last year, the highest level in the Organisation for Economic Cooperation and Development (OECD).

The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.

It emerged last year but ended 2010 with a contraction of 0.1 percent. - Sapa-AFP