The head of Spain's central bank has urged the country's government to implement labor market reforms.

Bank of Spain governor Miguel Angel Fernandez Ordonez claimed that changes to the Mediterranean country's employment policies are necessary to repair the battered economy.

The banker also urged the president Jose Luis Rodriguez Zapatero to push ahead with budget deficit reduction and told ailing Spanish financial institutions to restructure themselves.

Speaking at a KPMG conference in Madrid, Mr Fernandez Ordonez ordered the government to introduce "concrete and ambitious measures that will bring profound changes in our labor market".

He said: "If we don't adopt an ambitious labor market reform, the Spanish economy will enter a tough and complex period"

Spain presently has the largest unemployment rate of any country in the 16-member eurozone at 19.5 per cent, which is 9.3 per cent more than the average figure in the group.