France Is Forced to Face Political Facts in Effort to Stoke Economy

http://www.nytimes.com/2014/12/11/business/france-labor-market-jobs-unemployment.html

Version 0 of 1.

PARIS — Moving to battle high unemployment and a stagnant economy, the Socialist government of President François Hollande on Wednesday announced a long-promised program meant to stoke growth and create jobs.

The measures, including allowing more retail stores to open on Sundays, fall far short of what some experts say is needed to revive the stagnant French economy. Nonetheless, important members of Mr. Hollande’s own Socialist Party denounced the proposals as too threatening to the French way of life — in perhaps the clearest signal of why economic change is so hard to achieve in contemporary France.

“This is a moment of truth around the only question that matters: In what kind of a society do we want to live?” Martine Aubry, the first secretary of the Socialist Party, wrote in an opinion article in the French daily Le Monde.

Jean-Luc Mélenchon, the head of the leftist Front de Gauche, called on the French to march in the streets in protest.

The proposals, pushed by the centrist economy minister, Emmanuel Macron, who has been hailed by the business community as its kind of Socialist, takes narrow aim at cracks in the economy.

The so-called Macron law would open traditionally closed professions like those of notaries and auctioneers to more competition. It would let long-haul bus lines run frequently to compete more directly with the French national railway service. France would also sell 5 billion to 10 billion euros, or $6.2 billion to $12.4 billion, of state assets to reduce the French debt and invest in the economy.

As for Sundays, when many supermarkets must now close by 1 p.m. and most other retail stores do not open at all, the Macron proposals would let shops do business in major tourist areas. Other types of stores in other locations would have the option of being open for as many as 12 Sundays a year.

“Unemployment has not stopped rising for six years, and our priority is to fight it and to create jobs,” Prime Minister Manuel Valls said at a briefing on Wednesday at the Élysée Palace, where he was flanked by ministers of Mr. Hollande’s cabinet, including Mr. Macron.

“We don’t believe in artificial solutions to reduce the numbers,” Mr. Valls said. “The solution is that we need to enhance our competitiveness.”

With his ratings at the lowest of any French president in modern times, Mr. Hollande was already facing his party’s opposition to the more far-reaching, more centrist economic proposals that he had announced in the last year. A so-called responsibility pact, in which the government granted billions in tax breaks in exchange for a job-creation pledge by businesses, was opposed by unions, which said it gave too many concessions to employers.

The plan also opened a rift with France’s biggest employers’ association, Medef, which argued that the government was not doing enough to spur growth.

Mr. Macron recently acknowledged that the responsibility pact had thus far been a failure. But with the Hollande government on such a shaky political base, there was little room for the package announced on Wednesday to be more ambitious.

Economists say France still needs to make it easier for firms to hire and fire and to encourage investments.

“Though elements of his government are openly social-liberal and willing to push certain reforms, the government’s majority in the National Assembly is very fragile and can no longer be taken for granted,” said Famke Krumbmüller, an analyst based in London at the Eurasia Group. “This means that even if there is a certain degree of political willingness within the government, the political incapacity of its majority to promulgate these measures will prevail.”

The French Parliament is to start debating the measures next month. But before the ink was dry, Socialist leaders made their opposition clear.

“To believe that employees will go happily to work on Sundays under the pretext that they need jobs or will get premium pay shows a profound ignorance of reality,” Ms. Aubry wrote in Le Monde. “Do we want consumption to be the alpha and the omega of society?”

Ms. Aubry, who as a member of the assembly was the author of the law introducing the 35-hour French workweek more than a decade ago, is one of Socialism’s most influential voices.

Last year, Mr. Hollande had also moved to loosen restrictive labor practices, making it easier for companies to lay off employees in some cases and to cut workers’ pay and hours when times are hard, in exchange for extending more benefits to workers on short-term contracts. So far, though, only a handful of companies have tapped the measure, the government has said.

Mr. Hollande had made it a campaign promise to reduce unemployment and spur job creation in an economy that has barely grown for two years. But joblessness has remained stuck near a high of around 10 percent. He pledged last month that he would not run for office again unless unemployment fell. The government expects the economy to grow only 0.4 percent this year, and 1 percent next year.

Aside from addressing a skeptical French public, the measures were also a last-ditch attempt aimed at convincing France’s European partners that it is taking more steps to restructure the economy, after the government told the European Commission that it would not try to rapidly comply with rules requiring debt and deficit reduction at the risk of crimping growth.

France has repeatedly missed a requirement that budget deficits not exceed 3 percent of gross domestic product, and the government warned recently that it was unlikely to meet the deficit requirement before 2017.

The European Commission agreed last month to give France, Italy and Belgium until spring to bring their budgets into line with legal requirements as France and other large countries push back against German-led austerity in Europe.

This month, tensions flared anew between France and Germany over the issue, after Chancellor Angela Merkel suggested that France was not moving quickly enough to carry out the changes. “Shut it, Frau Merkel!” Mr. Mélenchon, the leftist party leader, told her in a Twitter message, written in German, that went viral.

Shortly after, the French finance minister, Michel Sapin, said that overhauls were being done for the French, “not to please this or that European politician.”

On Wednesday, Mr. Valls said that it was not only up to France to pursue growth. “We want a policy of European growth, with less rapid deficit reduction so as not to kill growth, and more investment,” he said.

“Everyone needs to accept changing what doesn’t work well,” he added, “even if that might upend long-held attitudes.”