French unions may torpedo Sarkozy's jobs plan

President Nicolas Sarkozy aims to clinch a deal next month to make France's job market more flexible and stem rising unemployment ahead of next year's election, but the country's unions may derail his hopes for sweeping reforms. Sarkozy's ambitious proposals, which he aims to launch at a January 18 social summit, seek to emulate Germany's 2003-2005 Hartz labour reforms, which paved the way for Europe's largest economy to emerge strongly from the global economic crisis.
The two key measures under discussion would make it easier for French companies to put workers on "partial unemployment" during a downturn, and introduce a broader "competitiveness pact" under which unions would agree to let working hours and pay vary more in line with demand.
But with jobless claims at a 12-year high, France's unions are already voicing opposition to any move they say would hit workers' pockets further by allowing firms to cut their wages during the downturn. "We are against the lowering of salaries in exchange for lowering working hours. That means putting the cost of the crisis on the back of the worker," said Maurad Rabhi, a spokesman for the CGT, France's second-largest union group, dismissing the summit as a "launching pad for the election".
Asked if France could reproduce Germany's success, built on co-operation between management and unions, Rahbi said: "The labour relationship in France is not at all the labour relationship in Germany. In France, there is a culture of confrontation; in Germany they practically co-manage." Investment bank Natixis also doubted whether Germany's strategy was applicable to France.
"The true success of Germany lies in its ability to reinvent itself in less than 10 years, carrying out bold reforms supported by a broad consensus shared by the population," it wrote in a recent report. With Sarkozy facing a tough battle for re-election in April and May, and legislative polls looming in June for members of his conservative UMP party, neither may have the appetite for a bruising battle with unions to push through labour reforms.
However, Sarkozy could secure a watered-down version, with the CGT and other unions less opposed to partial unemployment measures, provided the state stumps up cash to cover the partial unemployment benefits. Jean-Claude Mailly, secretary-general of labour union Force Ouvriere, has said the measure would only work if the government "puts more money on the table".
UMP legislator Pierre Mehaignerie, head of Parliament's social affairs committee, estimates the measures would cost at least 1.2 billion euros a year - a setback at a time when France is fighting to cut state spending to shore up its endangered AAA credit rating. Such measures already exist in France but, unlike in Germany where companies can strike their own deals with unions, they require lenghthy approval. Labour Minister Xavier Bertrand, who will start meeting with unions on January 5, has said the government aims to hack away red tape slowing the process.
Despite adopting the euro in 2002, France and Germany have trodden opposite paths over the last decade. Paris bet on domestic consumption, channelling productivity gains into a one-fifth rise in wages that fed consumer spending but upped labour costs, making its exports less competitive.