Labour reforms are crucial for France’s prospects, IMF argues

The government of French President Emmanuel Macron needs to make good on its reform promises if it wants a shot at boosting growth durably, the International Monetary Fund said Thursday.

Labour reforms are crucial for France's prospects, IMF argues
Photo: AFP

As the French economy picks up after a long period of slow growth, conditions are now favourable for Macron's plan to overhaul the labour market, cutting deficits and lowering taxes to make a real impact, the IMF said in a report on France.

Now everything is down to those plans becoming reality, the lender cautioned.

“Medium-term prospects will critically depend on the implementation of the reform agenda,” it said.

Meanwhile, the French economy is picking up pace, with the IMF projecting 1.6 percent growth of the gross domestic product (GDP) this year, rising to 1.8 percent in 2016, after just 1.2 percent last year.

“There is now an important window of opportunity for a bold and comprehensive strategy to boost growth, reduce unemployment, ensure the sustainability of public finances, and improve competitiveness, while also promoting inclusiveness and social mobility,” the IMF said.

The report said implementation of the programme will be the “key challenge”, especially with regards to fiscal overhaul and labour market reforms.

But it is precisely labour reform that has become a major bone of contention back in France, with unions having staged big protests and announcing more.

Thursday saw new protests against an overhaul of the country's labour code as unions hope to build pressure on Macron days before his signature reform is expected to become law.

The marches came a week after hundreds of thousands of people — 200,000 according to police, half a million according to organisers — demonstrated against the plan, in the first challenge to Macron since he was elected in May.

But the IMF said that if Macron manages to get his way, the economicrewards could be substantial.

“Comprehensive labour, tax, and spending reforms would help raise potential growth and boost employment while rebuilding room for fiscal manoeuvre,” the Washington-based body said.

But the IMF's directors also pointed to “past fiscal slippages” in France and the coming cost of planned tax relief measures.

“Success will critically depend on the timely specification and implementation of efficiency-oriented expenditure reforms”, they said.

France would do well to undertake “comprehensive spending reviews” which could “help identify savings at all levels of government while ensuring adequate social protections, which would help make consolidation sustainable”.

It also recommended measures beyond the current labour market reform to tackle France's high longterm structural unemployment.

France last month reported a five-year low in its unemployment rate for the second quarter at 9.5 percent which is, however, still nearly twice the jobless rate of Germany or Britain.


French labour reforms: What’s actually going to change for workers in France

French president Emmanuel Macron signed his contentious labour reforms into law on Friday, but what will they actually change for those who work in France?

French labour reforms: What's actually going to change for workers in France
Photo: AFP

The reforms overhaul large parts of the 3,300-page labour code which details workers' rights, with some chapters dating back over a century.

What's in the new law?

The reforms will give small companies in particular more freedom to negotiate working conditions with their employees, rather than being bound by industry-wide collective agreements negotiated by trade unions, or the national labour code.

For example companies with less than 11 employees will be able to negotiate conditions directly with staff without having a union representative present. It's these kind of changes that worry unions, who believe ordinary employees are not sufficiently trained to negotiate with bosses.

While certain issues will still be decided on at industry-wide level, with the input of unions, companies will be able to thrash out agreements directly with staff over subjects such as, whether they get a 13th month salary, loyalty bonuses, how many days off a year to cover child sickness, the number of extra days off for maternity leave etc.

A cap has also been set on the amount of compensation awarded by industrial courts in cases of unfair dismissal — a key demand of bosses who complain that lengthy and costly court cases discourage them from hiring staff in the first place.

The payout will depend on how long the person has been employed for and will rise progressively. For example a member of staff wrongly sacked after two years can gain compensation worth three months salary and a worker with 30 years of service can receive a maximum of 20 months salary.

Workers will now have 12 months rather up to 24 months to lodge their application with the tribunal for compensation for wrongful dismissal.

Defiant Macron signs his contested labour reforms into law

This latter measure was one among several that were withdrawn from reforms implemented by Macron's Socialist predecessor Francois Hollande under intense pressure from the unions.

In a further concession to companies, multinationals whose French operations are struggling will find it easier to lay off staff — even if they are making profits in other countries — while workers made redundant will receive higher payouts.

Voluntary departures, known in France as “rupture conventionelles” which are agreed on by both the employee and the company, will also be extended. Currently they have to be done on an individual basis but in future companies can put through “collective ruptures”, which will not be classed as redundancies.

Workers leaving via a rupture conventionelle are eligible to claim unemployment benefit (chomage).

The reforms will also give workers more right to work from home if appropriate and give companies more say on how long and how many times temporary CDD contracts are renewed for.

A few changes, including a measure to streamline workers' committees, which are mandatory within large companies, will not take effect until the end of the year.


The benefits and perks of working in France

What do the unions say?

Philippe Martinez, the head of the most militant union, the CGT, has said the reforms give “full powers to employers” and has vowed to press ahead with a series of strikes and demos which began last week.

But the leaders of more moderate unions, including the CFDT — the biggest private-sector union — and the leftist Force Ouvriere have been more conciliatory and the CGT's street protests appear to be losing steam already.

“The future of trade unionism… is our presence within companies” rather than on the streets, the head of the CFDT, Laurent Berger, said Thursday protests organised by the CGT.

In parliament, the opposition to the changes is led by the radical France Unbowed party of leftist firebrand Jean-Luc Melenchon, which is planning a mass march in Paris on Saturday.

The right and centre-left parties in parliament have broadly backed the reforms.

What's at stake for Macron?

Macron resorted to executive orders — with the blessing of a parliament dominated by his Republic on the Move (LREM) party — in the hope of avoiding a repeat of the months-long, sometimes violent protests unleashed by Hollande's labour reforms last year.

But the changes come as the former investment banker's approval ratings have plunged, with recent polls showing that only around 40 percent of French voters are satisfied with his performance.

Protesters have seized upon Macron's dismissal of opponents to his reform as “slackers”, with slogans such as “Watch out, Macron, the slackers are in the street”.

The president is hoping the changes will incite companies to hire more, while also encouraging foreign investors who have long been put off by France's powerful unions and restrictive labour law.

The reform is also crucial to his wider plans for the European Union: he wants German cooperation in making institutional changes to the 28-member bloc.

He believes that improving French competitiveness is a necessary first step to build trust in Berlin and restart the Franco-German motor which has driven integration on the continent.