Will France's Payroll Taxes Be Hiked?

In a blow to efforts to curb France's welfare state, the center-right government could be forced to restore $1.4 billion in unemployment benefits to an estimated 600,000 people whose payments were to be curtailed under recent labor reforms. A local court in Marseille on Apr. 15 threw out a December, 2002, agreement between employers and centrist labor unions that reduced the maximum unemployment benefit from 30 months to 23 months. The court said the agreement amounted to a breach of contract with people who had qualified for support before the reform took effect. The government has denounced the ruling. But with the unemployment insurance fund running a $5 billion deficit, the government could be forced to bow to leftist unions' demands to cover the added expense by raising employer-paid payroll taxes.

Edited by Rose Brady

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