Our Opinion: 2016

It’s got to be summer : France is on strike.

This week, I took my family to a holiday in Brittany, France, meaning we could evidence at first hand the current disputes and the dysfunctional nature of France’s economy.

Fuel is running low. The airports are closing down. Riot police have been called out to keep transport networks open.

France is tearing itself apart over labour market reforms. Trade unions are planning further strikes to protest against President François Hollande’s proposed liberalisation of the labour market. This follows on from last week’s blockade of refineries, fuel depots and nuclear power stations. As well as an ongoing strike of metro workers, unions plan “indefinite local transport strikes in all ten towns and cities” hosting the imminent Euro 2016 football tournament.

The country has been looking forward to staging a big spectacle this month. Euro 2016 kicks off in the Stade de France near Paris on June 10th, the first of 51 matches around the country ending with the final on July 10th.

A national day of strikes is threatened on June 14th, when the Senate, the upper house, is due to consider the changes to France’s labour laws which are at the centre of the dispute.

The ferocity of the protests might lead you to think that something vital is at stake, and Hollande is radically deregulating the economy. Yet, the reforms are timid by any standard.

The country has a 35-hour week, generous parental leave, long holidays, and employment protection that makes it virtually impossible to fire anyone, France is already one of the best countries in the world to be an employee – and one of the worst to be an employer. Nothing about the reforms will change that.

The 35-hour week remains in place. Firms will be able to ask staff to work up to 46 hours occasionally and 60 in exceptional circumstances, but they will have to compensate them with shorter hours in the weeks afterwards, so that over any three-month period they still only average 35 hours.

To fire someone, companies will have to prove it is loss-making, or that its sales are falling steadily. Judges will have the power to inspect the books to make sure a business hasn’t artificially inflated orders in the previous period, just so it can fire a few people later on. The rules are all so fiddly, that it will most probably deter companies from hiring anyone at all

Some of the reforms will actually make the system worse. Unemployment is 10%, whilst 25% of 18-24 year olds are out of work. Temporary contracts have helped cut unemployment significantly in countries such as Spain. Yet, the Government is increasing French payroll taxes (which can already add 30% or more to the cost of employment) for companies offering temporary roles/

As a result of these regulations, entrepreneurs are reluctant to start new businesses; investment by both French firms and foreign ones is deterred; and consumption is undermined by the relatively low rate of employment.

Compared with Britain or Germany, France remains in a terrible state. Unemployment has not dipped below 9% in almost 30 years. Meanwhile, the state gets relentlessly bigger – now consuming 56% of GDP, close to the level where it is debatable whether it can really be classed as a capitalist, rather than a socialist economy, any more.

Nothing Hollande is doing changes any of that and, whoever wins this battle, the economy will remain dysfunctional. At some point, as the Economist reported this week, France will have a battle over whether it wants to revive its economy with free-market reforms. Or accept permanent decline.


4th June 2016