The second- largest phone company of Europe, Telefonica SA has announced to cut 6,500 jobs in Spain. The announcement was made by the company after it reached a contract with labor unions on a new collective bargaining agreement through 2013. The company has revealed to slash down 20% of its employees in Spain over the next three years.

The job cuts are a part of company’s new strategy to improve profitability at its Spanish division. The workers, which will be laid down by the company would be liable to get unemployment benefits for up to two years.

The decision of job cuts was taken by the Chairman and Chief Executive Officer, Cesar Alierta. He has planned to concentrate on the Latin America’s economic growth to win back investors, who were discouraged by Spain’s unemployment rate, which was the highest of the euro countries at 21%.

The company has received criticism from the government for its recent move as it will worsen the economy.

Telefonica has also announced to associate future wages with the performance of the company and has promised to create about 680 jobs in the next few years.