In World Economy News 31/08/2017
The government of French President Emmanuel Macron unveiled a contentious labor overhaul Thursday, a pivotal step in the young leader’s drive to revive France’s economy and shore up the European Union.
The changes, which the government plans to pass by decree later this month, revise a thicket of rules and worker protections that businesses say discourage them from hiring and make it difficult to negotiate conditions with employees.
Their unveiling marks a moment of truth for the Macron government, which has been consulting with France’s combative unions for months in a bid to contain street protests that have undermined efforts by previous administrations to lower France’s chronically high unemployment.
The most contentious measures include a cap on court-ordered fines employers can face for making layoffs, and a provision that allows small companies to negotiate directly with non-unionized workers.
The stakes are high for Mr. Macron because he has made changing labor rules a condition for reaching a “New Deal” with Germany and other European countries to revamp the economic bloc’s architecture. It is also a starting point for his plans to reboot France’s sclerotic economy, from changes to the welfare and pension systems to government spending on housing and jobs training.
“My wish isn’t for this to be easy, but for it to be effective. The reform of the labor market is a reform of deep transformation,” Mr. Macron said in an interview with French magazine Le Point.
Union leaders had mixed reactions after meeting with the government Thursday. In a victory for Mr. Macron, France’s largest union CFDT said it would not join a street protest planned by the far-left CGT union in mid-September. However, CFDT Secretary General Laurent Berger said he was “disappointed” with the changes.
“We will remain extremely vigilant in the months to come,” says Mr. Berger.
Jean-Claude Mailly, head of the Force Ouvrière union, said “there are a certain number of points on which we still disagree.”
Europe is also watching closely. Over the last decade, France has slipped behind other major economies in the currency bloc, racking up wide trade and budget deficits and high, long-term unemployment. Mr. Macron blames successive French leaders for failing to emulate Germany’s shift to become more competitive with changes to its welfare state and labor rules in the early 2000s, under the leadership of then-Chancellor Gerhard Schröder.
Economists say that by making hiring and firing less risky, employers are likely to hire workers on longer-term and invest more in new projects. That in turn could boost productivity and fuel economic growth. French unemployment stands at 9.5%–more than twice the rate in Germany.
“It is clearly a package that can help France catch up,” said Stéphane Carcillo, an economist specializing in labor at the Organization for Economic Co-operation and Development.
Source: Dow Jones
