French employers head sees mixed chance of labor reform success

Reuters News
Posted: Dec 18, 2012 7:53 AM

PARIS (Reuters) - French company bosses and trade unions have a good chance of reaching a deal to overhaul rigid labor rules, the head of the main employers' federation said on Tuesday as a deadline neared.

The reforms are crucial to President Francois Hollande's efforts to revive the euro zone's second-biggest economy, which has been shedding jobs and struggling to generate the growth and revenue needed to bring the national debt burden into line with European Union rules.

With the last labor negotiating sessions due on Wednesday and Thursday, employers and unions are struggling to compromise on how to make hiring and firing easier while giving workers more security at the low end of the job market.

Hollande has told the two sides to reach an agreement before the end of the year or he would order his Socialist government to draft legislation without taking their recommendations into account.

"I think that we have at least a one in two chance of succeeding," Laurence Parisot, head of the MEDEF employers federation, told journalists.

The government can legislate on labor reform if talks collapse. But failing to sign up unions and employers means that this deal will lack crucial support from their constituents and likely face attempts to block or water it down in parliament.

"Never before have investors like Goldman Sachs or JPMorgan called me to ask whether I hoped we would succeed," Parisot said. "It's obvious that this negotiation is in the spotlight because investors know that it's very important."

France has been steadily losing ground on export markets, notably to other EU countries including Germany, for a decade and credit rating agencies say they are closely monitoring France's efforts to reform.

It has lost two of its three AAA rankings from the major agencies and the third, Fitch, warned last week that an expected peak in national debt of 94 percent of GDP in 2014 was "at the limit" for the credit grade.

To sign up to an agreement, Parisot said that employers need to see greater flexibility on moving workers within companies and reducing work time to adapt when demand is weak.

They also want workers' legal recourse in lay-offs to be reined in and reject union demands for short-term job contracts of as little as one week or one month to be taxed more heavily.

All unions are clinging to taxation of short contracts as a condition for signing a deal. The government needs at least three out of the five main unions to back an accord in order to use it as the basis to redraft labor laws early next year.

However, with unemployment already running at a 14-year high, unions are wary of anything that would make firing easier. One major union has rejected any deal imposing more flexibility.

(Reporting by Leigh Thomas; Additional reporting by Nick Vinocur; Editing by Ruth Pitchford)