September 24, 2014 / 11:00 AM / 5 years ago

French employer group urges 'shock therapy' for economy

PARIS (Reuters) - France’s main employer group urged the government on Wednesday to scrap the 35-hour work week, raise the legal retirement age and cut the minimum wage to bring down chronically high unemployment and stimulate growth.

French employer's body MEDEF union leader Pierre Gattaz attends the MEDEF union summer forum on the campus of the HEC School of Management in Jouy-en-Josas, near Paris, August 28, 2014. REUTERS/Benoit Tessier

Medef said its proposals would help Europe’s second-largest economy create 1 million jobs over the next five years. France’s unemployment rate is stuck above 10 percent, with nearly 3.5 million job seekers registered in August.

Unions reacted with outrage earlier this month when some of the proposals were leaked to the media, prompting Socialist Prime Minister Manuel Valls to urge all parties to steer clear of “provocations”.

But Medef chief Pierre Gattaz said he was ready to accept controversy to spark a proper discussion about what is holding back the French economy.

“We accept that risk because ... it’s our future together that is at risk,” he wrote in an introduction to the pamphlet, noting that some proposals “will certainly seem aggressive or exaggerated to some people”.

President Francois Hollande has introduced some measures aimed at stimulating hiring, including offering 40 billion euros of payroll tax cuts to firms, a modest easing of hire-and-fire rules and job training reforms.

But the moves have yet to yield clear results. Unemployment has continued to edge up despite the creation of thousands of subsidised jobs, while growth stagnated in the second quarter and business activity slowed in September.

Offering a rare glimmer of hope on the unemployment front, the jobless total dipped by 11,100 from July’s record high to 3.41 million in August, Labour Ministry figures showed on Wednesday.

The fall broke a nine-month streak of increases, but Labour Minister Francois Rebsamen said it would take more than a single month for a clear trend to emerge.

France’s lacklustre economic recovery, which has lagged euro zone peers and meant France has missed targets to reduce its public deficit, has raised pressure on a deeply unpopular Hollande to reform harder and faster.

German Chancellor Angela encouraged Valls to push ahead with reforms during his visit to Berlin on Monday and ECB chief Mario Draghi said earlier that “the risk of doing too little is higher than the risk of doing too much”.

Hollande’s government is set to introduce a law loosening rules that limit competition in regulated professional sectors, and has flagged a move easing rules on thresholds for worker representation, which companies say put a brake on hiring.

Yet Gattaz pressed him to go further and end the 35-hour work week introduced by a Socialist government in 2000, allow firms to get around the 1,445-euro ($1,856) monthly minimum wage, scrap two of 11 public holidays, and authorise exploration for shale gas, currently banned on environmental grounds.

He also called for a cap on taxes on companies, a further loosening of labour rules, and an overhaul of a generous jobless benefit system to encourage more job-seekers to accept employment.

“Having a legal work duration of 35 hours imposed on every company no longer makes sense in the France of today,” Gattaz told BFM TV. “We propose that each company negotiate its own work duration, according to its business needs.”

The government is unlikely to implement most of Gattaz’s ideas as Valls told parliament last week that neither the 35-hour work week nor the minimum wage would be changed.

Reporting By Emmanuel Jarry and Nicholas Vinocur; Additional reporting by Leigh Thomas; Writing by Nicholas Vinocur; Editing by Kevin Liffey

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