France – Labor reform underway

France’s Socialist government may clinch a deal on labor reform by the end of this year but its cautious approach means the outcome may fall short of business leaders’ hopes for a “competitiveness shock” to revive the economy.

President Francois Hollande wants a quick agreement that will help companies adjust more nimbly during economic downturns, ease labor costs and simplify layoff procedures, while giving unions guarantees against job losses.

Even without signatures from hardline unions FO and CGT, both of which oppose the measures, talks could produce a deal to be approved in a Socialist-controlled parliament in early 2013.

A reform could soothe France’s conflict-prone labor relations, helping firms hamstrung by regulation to claw back some competitiveness in export markets by allowing them to cut costs more efficiently when demand fluctuates.

However, efforts to please all parties may leave some sensitive issues untouched, disappointing critics hoping for an overhaul on a par with Germany’s “Agenda 10” reform launched in 2003 by former Social Democratic Chancellor Gerhard Schroder.

In particular, draft plans unveiled on Friday look unlikely to dismantle the highly-protective, long-term “CDI” job contract that makes it expensive for businesses to lay off staff.

“There will be some sort of compromise between unions and management but it will be a deal that leaves in place certain sacred cows like the CDI,” said Jean-Louis Dayan, head of the CEE public think-tank on employment.

“There is a risk the final product turns out to be less potent than some might have hoped for, due to a desire to avoid conflict with unions or employers.”…

via France steers careful path to labor reform | Reuters.