French unions and business agree new labour rules

By Anna Willard

PARIS (Reuters) - Two of France's main trade unions signed up this week to new, more flexible labour rules agreed with business to try to head off tougher measures by President Nicolas Sarkozy.

Sarkozy had given the employers' group MEDEF and the unions a deadline of January 15 to come up with a plan to reform rigid labour laws which businesses say discourage hiring and puts them at a competitive disadvantage with firms in other countries.

Failure to reach agreement would give Sarkozy carte blanche to propose his own reform, which both sides feared would be tougher than the one they agreed.

The deal, which needs the backing of three of the five main unions, extends trial periods for employees and opens the way for the negotiated departure of staff on permanent contracts.

However, it falls short of Sarkozy's election promise for a single type of job contract.

Surprisingly, the hardline Force Ouvriere union has backed the agreement, with the more moderate CFTC.

"If we don't reach an agreement, the government and the parliament will do what they want, based on a single contract," Force Ouvriere leader Jean-Claude Mailly said on France Info radio on Tuesday.

The powerful CGT union has said it will not sign up to the deal, arguing it would bring more negatives than positives for its members.