A French socialist government came within an inch of endorsing an ambitious reform to inject badly needed flexibility into France’s dysfunctional jobs market, reports the Financial Times.
But after a predictable rift in the Socialist party and a day of street protests, Manuel Valls, prime minister, retreated, abandoning some of the boldest provisions deemed too favourable to business.
The climbdown earlier this month could deter foreign companies, already put off by high unemployment and complex labour rules, from investing in France, economists say. “I picture myself in New York explaining the details of the bill to a US investor whose main impression is that once again, the French government has backtracked,” sighs a French economist at a large US investment bank.
Yet foreign investors and large multinationals have reasons to rejoice: to benefit them Mr Valls and President François Hollande have fought hard to keep the measures affecting big companies — sacrificing instead those affecting smaller businesses.
If adopted, the law would facilitate redundancies at French lossmaking plants. Currently, French judges can oppose lay-offs if the parent company, even if based abroad, is profitable. In the new draft, a French subsidiary can cut jobs if its revenues have fallen for four consecutive quarters and if it has posted operating losses for two quarters. Judges would only verify the accuracy of the financial statements and no longer delve deeper into the reasons.
Companies large enough to have union representatives would also be able to negotiate deals to work longer than the 35-hour weekly threshold. In case of a deadlock, chief executives would be able to organise referendums to let employees decide. To do so, they would need the consent of unions representing only 30 per cent of the workers.
“It reduces the power of judges in matter of redundancies and reduces the power of trade unions by allowing companies to sign ad hoc deals,” says Jean-Hervé Lorenzi, economist at French think-tank Le Cercle des économistes.
The law would bring the French model closer to the German and UK ones, where more is decided within companies.