adminunion supporters. Hollande pushed through a law in April making firings easier and labour rules more flexible. Now, he’s threatening to slap companies closing plants in France with multimillion-euro fines.
Unlike Gerhard Schroeder, Germany’s last Social Democrat leader whose so-called Agenda 2010 package on labour and benefits helped the country crawl out from under its label as “the sick man of Europe”, Hollande’s mishmash of policies has left companies confused and hesitant to invest. That’s making it difficult to end Europe’s second-largest economy’s recession and reverse joblessness that’s at a record high.
“There are somewhat contradictory signals,” Xavier Huillard, chief executive officer of Vinci SA, Europe’s biggest builder, said in a June 18 interview. “We first and foremost need action rather than big new ideas; we need more coherence and more stability.”
Companies in France are not investing. National statistics office Insee said last week that investment by non-financial companies will drop by 2,4 percent this year, more than the 1,9 percent decline in 2012. Corporate margins fell to the lowest since 1985 last year.
Businesses are sagging under the third-highest hourly wages among the 17 nations using the euro, after Belgium and Luxembourg, making reforms more pressing, Ernst and Young said this month in a report entitled “France: Last Call”.
As he has on other economic issues, Hollande has so far played both sides on labour rules, corporate taxes and other policies affecting business.
His April labour law allows companies to scale back hours and wages during economic slumps, a move welcomed by businesses.
Those steps may be weakened by the proposed Bill to prevent closures, a concession Hollande made to those who want to punish profitable companies that shut plants. The draft Bill would force companies with more than 1 000 employees that plan to shut a site to “actively” seek buyers for three months.
Workers would be able ask a court to assess the effectiveness of the search, with a fine of as much as 20 times the monthly minimum wage — about 28 000 euros — per job lost if “credible” takeover bids are turned down.
Business leaders say the bill — called the “Florange law” after an ArcelorMittal steel plant that was shuttered following the government’s inability to find a buyer — defeats the purpose of closing a plant.
Factories are often folded to address margin erosion from excess capacity, and pushing for a sale would mean that issue isn’t addressed, said Frederic Vincent, CEO of Paris-based cables maker Nexans SA.
“If you’re deciding to shut down, it’s probably to trim overcapacity,” he said in an interview. “If you’re forced to give it away to a Moroccan or a Chinese, you’re not addressing the initial need to reduce capacity.”
Hollande, who has pledged to reverse the trend of rising joblessness by the end of the year, is struggling to meet that goal as companies from carmaker PSA Peugeot Citroen and Alcatel-Lucent to drugs company Sanofi cut thousands of jobs.
More than 3,26 million people are jobless in France, putting the country’s unemployment rate at 10,8 percent, the highest in 14 years, and double that in neighbouring Germany. Ten years ago, German unemployment stood at 9,5 percent, on its way to 11,4 percent in 2005, according to International Labour Organisation standards.
Former Chancellor Schroeder’s Agenda 2010 package unveiled in 2003 cut taxes, made it easier to fire staff, forced those out of work for more than a year to accept any reasonable job offer and reduced long-term benefits. The efforts helped German businesses turn around.
“Hollande’s problem is that he’s still trying to spare various left-leaning groups, which is blurring his message,” Guy Groux, a labour expert at Paris-based political research centre Cevipof, said in an interview. — Bloomberg.
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