Hollande shuns fight with protected jobs as EU pressure builds

PARIS Fri Jul 5, 2013 9:04am BST

France's President Francois Hollande addresses a news conference during a European Union leaders summit in Brussels June 28, 2013. REUTERS/Francois Lenoir

France's President Francois Hollande addresses a news conference during a European Union leaders summit in Brussels June 28, 2013.

Credit: Reuters/Francois Lenoir

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PARIS (Reuters) - It looks like a bread line in Soviet Russia, but the queue snaking away from Paris's Opera Garnier house on a Saturday night is full of tourists waiting for a different sort of scarce commodity: a taxi to bring them home.

Frustration with Paris's taxi shortage - the city has fewer now than it did in 1920 - is just one symptom of competition-killing rules that limit access to dozens of professions and which the European Union says stunt the French economy.

But President Francois Hollande has yet to formulate any plans to break up cartel-like behaviour in professions ranging from taxi driver to notary to veterinarian, despite fresh calls from Brussels to cut red tape.

His reluctance to risk a fight with powerful interest groups shows the limits to his appetite for reform when many economists say more competition could give the faltering economy a boost.

"These are reforms that bear fruit straight away," Barclays chief European economist Philippe Gudin said. "When you introduce competition, you have new players and so you create jobs and you reduce prices straight away."

The European Commission is due in September to step up pressure on member states to deregulate under EU provisions on free movements of persons, services and capital, a European source said.

Despite pressure from markets and EU partners to reform, Greece and Italy have made little progress breaking open closed professions to competition in the face of entrenched interests.

But nowhere is resistance more dogged than in the eurozone's second largest economy, where "competition" has negative overtones and previous attempts to liberalise have run aground.

"It's not just that these are powerful lobbies with strong traditions of sticking together against threats - it's the fact that France doesn't necessarily think competition is good," said Eric Le Boucher, a journalist at business daily Les Echos and co-author of a 2007 government-commissioned report which called for deregulation of professions.

France's political class is almost devoid of free-market advocates, reflecting widespread statist and anti-liberal views. The EU's so-called "Bolkestein" directive on services in 2006 met its fiercest resistance in France.

Scepticism has barely lessened. In a 2012 roadmap for reform by former EADS CEO Louis Gallois, he criticised the Commission's "dominant" rhetoric on competition and, unlike in 2007, included zero recommendations on deregulation.

THE USUAL SUSPECTS

While Brussels has made deregulation a condition for granting France more time to cut its budget deficit, economists say it should be done for the economic gains.

Herve Boulhol, head of the France desk at the Organisation for Economic Co-operation and Development, said an ambitious reform of services broadly could yield 5 extra points of GDP over ten years, but could be costly in the short term.

Economist Gilbert Cette at the University of Aix-Marseille calculates that opening professional services alone would boost potential growth by as much as 0.2 percentage points annually.

Indeed, if telecommunications are a guide, breaking the state monopoly in the 1990s has led to a sharp drop in prices as well as thousands of new jobs.

But French government officials say it's not a priority to reform the 150 or so regulated professions whose members guard access through exams, high buy-in costs and varying control over the number of license-holders.

While limited supply maintains prices and standards, it distorts the market: Paris's 19,000 taxis cover the city easily on weekdays, but fall short on weekend nights when demand peaks. Deregulation could allow new entrants to satisfy that demand.

Drivers fear other consequences. "If there are 50,000 taxis in the streets of Paris, we're going to eat each other alive," said Jose, 56, a taxi driver for 14 years who earns about 200 euros per day working 11 hours per day, 13 out of 15 days.

France is by no means alone in loving regulation. With more than 200, Austria is Europe's worst offender on regulated professions, while Britain and Germany have more than France, according to the European Commission's web site.

But the unemployment rate in France is 11 percent, more than twice that of Austria; and the barriers to entry for some jobs in France are more obscure and arduous than anywhere else.

Notaries, for example, must be nominated individually by the Justice Ministry after seven years of study - their number is fixed at 9,500 - and can only open a notarial practice if they buy one from a retiring notary. Even then, the purchase must be approved by senior notaries in regional and national votes.

Civil law notaries defend the centuries-old system, saying they fulfil a state mandate to ensure the authenticity of deeds.

But now their world of average annual wages of 225,000 euros ($291,900) and enviable job security faces several challenges, not least from degree-holding notaries desperate to be let in.

"Seven years of studies, two years of internships, now jobless," wrote a user under pseudonym "Edenwood" on a news forum for unemployed notaries. "I thought I was training for a dream job but I discovered a rotten system. Don't do it."

CHANGE COMING

Hollande was little moved in May when the European Commission wrote that France should "enhance competition in services and "remove unjustified restrictions".

Asked on live TV this month if he planned to cut through red tape for some jobs, he said he doubted the economic benefits, adding: "Do you think taxis are really living well these days?"

That echoed Didier Hogrel, head of the FNDT taxi union, who said his profession suffered from "unfair competition" and would be ready to strike "the very same day" if rules were threatened.

Notaries are similarly defiant: "We are not affected by the directive on professional qualifications, and Brussels knows that," said Jean Tarrade, president of the Superior Notaries Council, referring to a 2005 European ruling.

The European source said regulation was justified in professions where barriers to entry ensure public safety - but not all. Where barriers were unjustified the Commission sought harmonisation, rather than launching infringement proceedings.

A French official declined to detail any deregulation initiatives, but did say the Finance Ministry had commissioned a feasibility report. The first professions concerned may be lawyers and notaries, for which Hollande agreed that France "must see if there is room to open them up more".

The question may be more "when" than "if". Legal experts suggest French notaries may face challenges to their privileges following a landmark decision by the European Court of Justice which forces them to consider foreign applicants.

"I think this is just the beginning," said Leon Verstappen, a professor of private and notarial law at the Netherlands' University of Groningen.

(Editing by Peter Graff)

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