By Nicholas Vinocur
PARIS (Reuters) - French employers will reject moves to overhaul rigid labor rules unless unions drop demands to tax short-term contracts more heavily than long-term ones, their leader said on Monday, suggesting talks this week could fail.
Socialist President Francois Hollande called on employers and unions to strike a deal by the end of 2012 that would grant companies more flexibility in hiring and firing while giving more job security to workers on short-term contracts.
Talks between the Medef employers' union and main labor groups spilled into January after talks broke up in December without a deal, with each side accusing the other of making unacceptable demands.
The government says it will impose its own deal if the two sides fail to reach an agreement.
As talks resume this week, Medef chief Laurence Parisot said employers would be unable to sign a deal imposing higher costs for hiring on seasonal or short-term contracts.
French per unit labor costs are currently among the highest in the European Union, above Germany but below Denmark, and are often cited by economists as a brake on growth and a factor in maintaining chronically high unemployment.
"At this point in our discussions, including talks we had all day yesterday, on Sunday... the Medef will not sign the deal," Parisot said on Radio Classique. "The issue of taxation for short contracts is a vital question."
Parisot accused Hollande's Socialist government of indirectly interfering in the talks to the employers' disadvantage.
The government is pushing for a deal to address concerns that France has a two-speed labor system, with those on long-term job contracts enjoying too much job security and those on short-term contracts too little.
Employers want an agreement that will allow companies to adjust their wage burden more nimbly in a downturn, as well as simplifying the rules about firing workers to make the process more predictable and keep costs in check.
Two hardline unions reject measures to add flexibility. All five unions represented at the talks want greater job security for workers on flimsy contracts, calling for employers who use them to be penalized by paying higher taxes or more unemployment contributions.
Unions reject greater flexibility in work contracts and demand more job security for short-term workers. They want employers using short-term contracts to pay more tax or higher contributions to the national fund that pays out unemployment benefits.
Labor Minister Michel Sapin said the government would present a draft law regardless of the talks' outcome. However, he expressed faith in a deal being reached by January 11, when talks are due to conclude.
"They're negotiating, it's their responsibility, and I'm letting them negotiate," he told Canal+ television.
Hollande's government has enough Socialist and allied lawmakers in parliament to pass a labor reform.
But without a deal between unions and employers, it will be more exposed to criticism from both sides and unions may influence left-wing lawmakers into watering down any reform.
The head of the CGT union, Bernard Thibault, said last week he would oppose more labor flexibility with "all his force".
(Additional reporting Vicky Buffery; Editing by Jon Boyle)