PARIS (MNI) – French President Francois Hollande underscored Monday
that coming reforms to country’s social model must take account of the
need to reduce public deficits and debt.

Kicking off a two-day conference on employment and social
protection with employers and labor unions here, Hollande suggested that
payroll taxes alone could not be the sole source of social financing,
given the need to stem the erosion in competitiveness that led to a
record trade deficit of some E70 billion last year.

The president alluded to the structural reforms in Germany that
have bolstered economic competitiveness, but in the same breath spoke of
the role of consumption in supporting activity.

Indeed, Hollande proposed no concrete measures, hoping that all
sides, including his ministers guiding the negotiations, arrive at
“positive compromises” in order “to prepare the reforms together.”

The agenda is vast, covering wages, professional training,
re-industrialization, pensions and social protection and sexual
discrimination, with top priority for employment.

Hollande said the conference would be merely the start of an
ongoing process during his five-year mandate aimed at overcoming the
absence of “a culture of negotiation” in France. “We must rediscover the
sense of dialog,” he said.

Setting narrow limits on the financial leeway for reform at the
outset, Hollande warned that the E50 billion the government pays in debt
service charges could rise “at any moment” if international lenders lose
confidence. Nor can the reforms further aggravate the problem of
competitiveness, he insisted, highlighting the “rigidity” of domestic
production costs.

At the same time, the president called for greater security for the
lion’s share of new employees hired under temporary work contracts. He
laid out an ambitious role for government in averting layoffs and
promoting productive investment, notably via the future Public
Investment Bank.

The challenges ahead cannot be overcome solely by the sacrifices of
employees, he asserted, attacking the “excessive” salaries of some top
executives as “unacceptable” and demanding a greater role for employees
in company wage-setting councils. “Justice will be the condition for
recovery,” he said.

Hollande presented the “Great Social Conference” as a form of
“social democracy” whose “dynamics will be itself a change in method”
and promised another in one year’s time.

However, the conference is unlikely to reconcile the divergent
demands of employers and unions on the key issue of wages and worker
protection, leaving the government with the daunting task of seeking a
compromise compatible with overriding need for budget consolidation.

While public employees are demanding an end to the broad-based
freeze on salaries, Education Minister Vincent Peillon on Sunday
rejected the appeal, given the need to hold labor costs stable in the
civil service.

The head of the employer association Medef, Laurence Parisot,
repeated Sunday that firms are shouldering an excessive burden of labor
and social costs, warning of a “massive” wave of downsizing in the
autumn after a difficult summer for business.

CGT union leader Bernard Thibault rejected the charge Monday,
insisting that the problem of competitiveness was due rather to a lack
of investment in research and development.

As to employers’ demand that payroll adjustments be made less
costly, Thibault countered: “We refuse!”. Instead he called for an
overhaul of the E180 billion in aid and indirect subsidies that
companies receive from the government.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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