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Business English: France debates decline of industrial might
François Hollande is caught between union demands and business calls for reformSmouldering tensions between French business and the new Socialist government combusted in July in a bad-tempered clash over the drastic restructuring plan unveiled by struggling carmaker PSA Peugeot Citroën. Demands to revise the plan, which envisages the closure of a car plant and the net loss of 6,500 jobs, culminated in an outspoken attack on the company by Arnaud Montebourg, the left-leaning industry minister.
The Peugeot case has brought to a head a broader and intense debate over how the country should confront its declining industrial competitiveness, symbolised by a record EUR70bn trade deficit last year, with business clamouring for reforms to cut labour costs and ease labour market rigidities.
To the frustration of many in the business community, the first steps taken by the administration of President François Hollande have been to raise taxes, mainly on the wealthy and big companies, soften pension reforms put in place by the previous centre-right administration, and boost the minimum wage.
The question now, however, is whether the government, confronted by an alarming slide in corporate profitability and mounting unemployment, is nonetheless prepared to contemplate the reforms demanded by industry.
"One has the impression that ministers are now discovering the scale of the gravity of the crisis," said Alexia de Monterno, deputy director of the business-friendly Montaigne Institute think-tank.
Mr Montebourg, whose official title is "minister of productive recovery", has adopted a stridently interventionist stance as he has found himself firefighting a spate of threatened redundancies around the country. Apart from locking horns with Peugeot, he has called in the chiefs of France's mobile telecoms operators to make clear his concern about their restructuring plans, labelled as "unacceptable" the potential closure of an aluminium plant by Rio Tinto, and wrestled with ways to keep open a tea-processing unit owned by Unilever.
He also visited his opposite number in Luxembourg to build common opposition to potential closure of plants by ArcelorMittal, the big steel group, including a site at Florange in northern France. "Where businesses are earning money and evidently abusing the situation, we will engage in very hard negotiations which for us must lead to reversal [of closure plans], or in any case an agreement with the unions," Mr Montebourg said. Along with Michel Sapin, the labour minister, Mr Montebourg has mooted the stiffening of legislation to put new, restrictive conditions on closures and redundancies.
But despite these declarations, there are signs that the government, under strong public and behind-the-scenes pressure from business leaders, is listening to pleas for structural reforms to ease labour market conditions for industry.
A positive move, said Ms de Monterno, is the appointment by Jean-Marc Ayrault, prime minister, of Louis Gallois, former head of the aerospace group EADS, to produce a plan of action on competitiveness by the end of the year. "The last thing he said before he was appointed was that [labour costs] were the top priority. The government has been cautious, but they have taken it on board." she said.
A senior financial sector executive said a group of top business leaders had been "pushing very hard" for urgent action. "The president and the prime minister have a full menu of proposals for what needs to be done," he said. The executive cited the need to reform France's labour code - which runs to thousands of pages - to make it easier for companies to hire and fire. "It is a killer," he said.
An often-expressed hope in business circles is that a Socialist government should find it easier than a right-of-centre administration to push through reforms because it should be able to carry its trade union allies with it, averting the kind of militant street protests that France has so often seen in the past.
Mr Hollande, a politician with a record of seeking consensus, has laid a heavy emphasis the need for business and trade union leaders to reach agreement on reforms, launching a series of negotiations in July. He has also stressed the need for France to invest more in innovative and smaller businesses as a fundamental solution to the issue of competitiveness.
But the rhetoric against Peugeot and the political imperative of trying to stem the current wave of redundancies has tended to eclipse tentative government signals that it might be readying a "competitiveness shock" of the sort sought by industry leaders.
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The Financial Times, 06.09.2012
© 2012 The Financial Times,
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