June 17 (Bloomberg) -- President Francois Hollande is facing one of the biggest social challenges of his more than two years in office as protests from rail workers and actors’ unions test his efforts to fix the French economy in baby steps.
French rail traffic was disrupted for a seventh day today as some unions at train operator SNCF protested a merger with the rail network company. Actors and their support teams -- known as “les intermittents,” who demonstrated yesterday in Paris -- are threatening to shut down theater festivals such as the one held every July in Avignon to block an increase in their welfare contributions and a delay in payments.
In both cases, Hollande’s Socialist government has sought to shield the workers from deeper changes sought by business groups and economists as it struggles to put France’s public finances in order. The trouble for Hollande and Prime Minster Manuel Valls is that they are committed under European rules to reducing France’s budget deficit, have pledged not to raise taxes that are already the highest in the euro zone and need to find ways to revive growth.
“These are two big taboos: The intermittents and the SNCF have long been problems,” said Fabrice Montagne, an economist at Barclays Plc in Paris. “Hollande’s reforms are hardly the most ambitious but they are part of an incremental approach meant to open the door to further changes down the road. That’s why there is general surprise that resistance has become so strong.”
Lawmakers begin examining a revised 2014 budget this week. Valls warned members of the Socialist majority who are considering voting against 4 billion euros ($5.4 billion) in spending cuts that they’re playing a dangerous game.
With Hollande’s approval rating near a record low of 18 percent and three years to go before the next election, the party needs to govern responsibly or face the risk of a popular backlash in 2017, Valls said.
“I’m sure of one thing, taking any other path will condemn us to failure,” he said June 14. “The left can die” and “France can come apart,” he said.
The protests have become symbolic of the wider displeasure with Hollande, even though his government has avoided making brutal changes in the benefits of the two groups.
The actors were spared the abolition of their special unemployment regime, which loses 1 billion euros a year. Rail workers were told their privileges, which include a retirement age as low as 50, will be preserved as the state-owned SNCF is prepared to face competition in 2019.
Although fewer than a fifth of SNCF employees are on strike, with the CFDT and UNSA unions opposing a movement spearheaded by the Sud Rail and CGT unions, French television stations have carried several reports of stranded passengers and packed trains. The state-owned train operator estimates that only six in 10 high-speed trains ran yesterday.
The striking unions have voted to maintain their action tomorrow. Only about a third of French voters understand what the rail workers want, while 76 percent oppose the strike, according to a Harris Interactive poll published in today’s Parisien newspaper. The online poll of 802 voters was taken June 16.
Faced with the disruptions, Hollande has personally pushed back, committing to a plan to merge SNCF with Reseau Ferre de France intended to make them profitable and reduce their combined 44 billion-euro debt. France’s National Assembly is scheduled to debate the government’s proposal today.
“There comes a time when you have to know how to end a movement and take account of the wider interests of the population,” Hollande said June 13. “At a certain point, work has to be resumed.”
So far, the theater unions have received no such rebuke for protesting an agreement reached by some unions and business leaders earlier this year that now needs to be implemented.
Under the current unemployment system, the intermittents draw more than five times what they pay in, compared with the multiple of 3.6 for normal workers on non-permanent contracts and a multiple of 0.5 for the system as a whole, according to France’s National Auditor.
Actors need to have worked an average of 12 hours per week in the previous 10 months to qualify for benefits.
The agreement reached in April by some unions and business lobbies sought to reduce the 1 billion-euro annual unemployment-regime deficit by about 20 percent. To do so, contributions would be increased, payouts would be capped at 4,380 euros a month instead of 5,475 euros and beneficiaries would have to wait longer once becoming unemployed before receiving benefits.
What they agreed to “is peanuts -- why wouldn’t the intermittent actors unions support it?” asked Agnes Verier-Moline, director of the Fondation Ifrap in Paris. “What is shocking is that these people contribute so little to the system from which they draw so much.”
The actors themselves voiced their disagreement yesterday at a demonstration that numbered several thousand near the Louvre in central Paris.
“This reform is a de facto pay cut,” said Julia Andre, a 58-year-old theater lighting operator attending the protest. Fellow protester Caroline Muhoza agreed. “We’re not in this for the money but if we want to start a family or become home owners we’ll have to leave the country.”
For Montagne, the Barclays economist, the challenge for the government is to remain firm without fueling protests.
“Baby steps are the only way forward in France,” he said. “The government is maintaining its position without throwing oil on the fire and that’s a good thing.”
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