France: New labour laws for more competitiveness

Only hours had passed, after Olli Rehn, Vice-President of the European Commission responsible for Economic and Monetary Affairs early in the morning of Friday 11 January in Brussels had accused France  of doing little to regain its lost competitiveness, and in Paris during the same afternoon three labour unions agreed with employers on a package deal containing deep changes of labour conditions relaxing old rigidities. This was a win for Francois Hollande because it was an obvious paving of ground for the forthcoming legislative initiative of his administration to introduce new and more relaxed labour laws. In detail three out of five major French labour unions, at the exemption of CGT and FO, concluded a draft agreement which is expected to be approved next week. The agreement provides for an easing of layoffs and more incentives for hiring young people. President Hollande hailed the agreement by saying that this is a win for the social entente. The three unions that helped conclude the agreement are the CFTC, CFDT and CFE-CGC. Returning back to Ollie Rehn, only hours earlier the Commissioner speaking at a breakfast meeting organised by the European Policy Centre in the Belgian capital had directly reprimanded France as follows: “We must be cautious not to lose our international competitiveness, as we are witnessing in countries such as France and Finland, which have been registering worrying losses of their shares in global markets. It is precisely for these reasons that we proposed, in our Blueprint for a deep and genuine Economic and Monetary Union, the creation of a Convergence and Competitiveness Instrument. Its objective would be to effectively push forward Member States’ economic reforms for rebalancing and competitiveness. The CCI would combine a binding commitment by a Member State to a particular reform with European financial support to its implementation”. On the same occasion Rehn had noted that other countries had done a lot to regain competitiveness paying high political and social costs: “In Ireland, relative unit labour costs have fallen by almost 20% since the peak of the crisis, exports are growing and companies are creating jobs. In Spain, exports grew by nearly 20% in real terms between 2009 and 2011. And in Greece, the competitiveness losses over the past decade are being recouped”. Economic and political analysts in France observe that the most important element of this agreement between labour unions and employers is the easing to cut down hours of work and pay in difficult times as presently. This was a friction point in France’s economic and social affairs for quite some time. Francois Holland is adopting in the labour front a completely different approach than his predecessor Nicolas Sarkozy. The latter was following a top-down policy, while Hollande is unfolding a more conciliative initiative encouraging the two social partners first to agree on certain key points and then introduce changes to Parliament to reshape the country’s labour legislation. Many analysts observe that France is losing competitiveness ground to Italy and even Spain, not to say anything about Germany. If the country continues on the same path there will be soon a turning point where Paris will be the next patient of Eurozone. And this will be a huge weight that Eurozone cannot bear. It was exactly like this when Eurozone made clear to Italians that they had to carry out themselves the task of rebalancing their economy.