Hollande Labor Talks Edge Toward Accord Without Hardline Unions

President Francois Hollande’s bid to revamp French labor law is heading toward an agreement that’s set to leave out the country’s two most hardline unions.

Negotiations between business leaders and unions advanced today as employers agreed to an increase in social charges for some short-term job contracts. CGT and FO, two of the five labor unions involved, said they won’t go along with the accord.

“We have made substantial progress, though there remain three or four points to clarify,” Patrick Pierron of the CFDT union told journalists outside the negotiating room in Paris. “We’re not there yet but we’re moving toward an agreement.”

Socialist Hollande is seeking to stem a 19-month-long increase in jobless claims and improve the competitiveness of an economy that has barely grown in more than a year by giving employers greater flexibility in a slump. The latest working draft being discussed includes terms that would allow companies to cut working time and pay when orders from clients dry up.

“We’ve made a significant effort,” said Patrick Bernasconi, who’s representing the Medef employers’ lobby in the talks. “We have made advances that will make businesses more competitive, that will create the conditions for more employment because there will be greater flexibility in the labor market.”

After pushing through a 20 billion-euro ($27 billion) payroll tax credit for businesses last year, the labor negotiations are the second significant plank of Hollande’s plan to improve French competitiveness in the wake of the euro area sovereign debt crisis.

Labor Costs

Labor costs that are high relative to its neighbors and rigid working rules have contributed to France’s record trade deficit and surging unemployment, economists say.

The European Commission, the International Monetary Fund and the Organization for Economic Cooperation and Development have called on France to do more to bolster its competitiveness.

“It’s essential that France continue on the path of reform,” European Union Economic Commissioner Olli Rehn said today in Brussels. “I’m looking forward to a positive outcome from the consultations between the social partners and I’m looking forward to bold and determined action by the French government.”

Still, some unions say they’re unlikely to endorse an agreement along the lines currently being discussed, saying it will encourage the use of short-term contracts that leave workers without job security.

Short-Term Contracts

The rigidities of France’s full-time work contracts have already driven employers to increasingly use short-term contracts, leading to a two-tier labor market.

Of the 21 million job contracts signed each year, only 3 million are permanent, with the rest being short-term pacts. Of the 18 million short-term contracts, 14 million are for less than a month, according to Louis Gallois, former head of Airbus SAS parent European Aeronautic Defence and Space Co., who was asked by Hollande to write a report on French competitiveness.

“Signing this accord is out of the question,” said Stephane Lardy of the FO union. “What we want is a tax on all temporary contracts. No one really expects this deal to lead to more permanent contracts.”

Agnes Le Bot of the CGT agreed. “This doesn’t respond to the need for more secure jobs,” she said. “We don’t intend to sign” an agreement that reverses social progress.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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