Macron Lights Fuse on ‘Mother of All Reforms’ to Renew France

Macron’s cabinet Wednesday approved a broad outline of changes to the labor code and is asking parliament for the authority to negotiate the details over the summer with unions and business groups. The government plans to introduce the new framework in September by decree, to avoid getting tangled up in a long parliamentary debate with numerous amendments.

After sweeping aside the establishment to claim the presidency and then cementing his dominance of the political landscape with a resounding majority in this month’s parliamentary elections, Macron wants to show France’s often frustrated European partners that he can deliver. With his political capital at a high and the economy coming off the strongest six-month period of growth since 2010, he might never get a better chance.

“The labor-market reform is the mother of all reforms, both from an economic and social point of view,” Finance Minister Bruno Le Maire said in an interview with Le Figaro June 24. “While the context is favorable, we must not waste a minute.”

Loosening France’s labor code was a central campaign issue for Macron and he began negotiations with unions and business leaders as soon as he claimed the presidency in May, even before he’d secured his majority in the legislature. Yet despite his mandate from the voters, the most hard-line elements within the union movement are preparing for battle all the same.

“I call on the president to be humble and prudent, and not to think that just because he was elected and has a big majority, he can do what he wants,” Philippe Martinez, head of the CGT, France’s second largest union, said in a June 25 interview in Humanite. “Macron has blown away the political framework and the traditional parties. The unions, including the CGT, are one obstacle he can’t get around.”

The CGT has called for a general strike Sept. 12. France’s largest union, the CFDT, said it will wait to see the decrees in September before deciding what steps to take.

Macron’s Plan

The talks focus on three main areas: limiting severance pay and other costs for companies firing staff, simplifying workers’ representation councils, and deciding who should negotiate wage deals. Medef, a business lobby group, is pushing for companies to have the right to agree terms with their employees, rather than being governed by industry-wide deals.

“Our labor code no longer reflects the realities of the economy,” government spokesman Christophe Castaner said Wednesday after the cabinet meeting. Labor Minister Muriel Penicaud will provide more details of the government’s proposals at a press conference at 2:30pm Paris time.

“France needs change, it needs reforms,” Pierre Moscovici, the European Union commissioner for economic affairs, said May 21 on France Inter radio. “It needs to be made more dynamic and that’s what we expect from the president.”

Moscovici himself failed to make much progress on the labor market when he served as finance minister between 2012 and 2014 in the Socialist administration of Francois Hollande. In fact, France’s last three governments all tried to liberalize labor law, and all three watered down their plans in the face of union opposition.

In 2003 and 2005 Jacques Chirac managed to loosen the 35-hour cap on the working week, making it easier and cheaper for companies to add extra hours. In 2008, Nicolas Sarkozy made it simpler for individual workers to negotiate their own departure. And Hollande’s reforms of 2013 and 2016 made it easier to justify layoffs due to a downturn in business.

But the French labor code is still too complicated and many companies are afraid to hire because of the difficulties in shedding staff if their revenues dip, according to Pierre Gattaz, head of the Medef business lobby.

Penicaud, the labor minister, said Wednesday on RTL radio that the government wants to set a floor and a ceiling on severance pay. French labor courts hear 150,000 cases a year involving firings and the rulings are inconsistent, she said. “Employees don’t think it’s fair because someone else in the same situation can receive twice as much, and employers live under uncertainty about what they may have to pay,” she said.

Investors’ Focus

The CFDT has been more openly conciliatory than the once-communist CGT but even it has signaled resistance.

“The CFDT did not ask for a new reform of the labor market after those of 2013, 2014, 2015 and 2016,” the union said in a June 22 statement after meeting Penicaud. “But the CFDT will take part, pushing for greater dialog, a greater decision making role for unions, and will oppose all increases in the unilateral power of employers.”

Macron, as economy minister under Hollande, had worked on earlier versions of the 2016 law that went much further in easing restrictions on firing and negotiating own labor accords. After the bill was watered, Macron quit the government to set up his own political movement.

“When I speak to foreign clients, the first question usually they have is whether France will reform its labor code,” said Philippe Waechter, director of economic research at Natixis Asset Management. “Sometimes we never get on to other subjects. France’s image is really at stake in these talks.”