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back to index backEUROtalk August,  2005

France Loosens Labor Law to Help Firms

The French government approved new labor laws Tuesday making it easier for small companies to hire and fire, prompting angry reactions from trade unions.

Prime Minister Dominique de Villepin and members of his government issued six new decrees designed to boost employment as they met for their last cabinet meeting before the summer break.

Among the new measures, the most ambitious — and hotly contested by unions — is the "New Recruit Contract" allowing companies to lay off workers anytime in their first two years of employment, without giving any reasons.

The new plan takes effect Sept. 1 and applies only to companies with 20 or fewer employees. Workers laid off under the new conditions will be given at least two weeks' notice and will be entitled to unemployment benefits but not the usual levels of severance pay.

French President Jacques Chirac said the new measures "demonstrate the country's determination to go beyond traditional solutions and to modernize thoroughly," in comments relayed to reporters by the government's official spokesman, Jean-Francois Cope.

"The tools are in place to launch a new dynamic in the labor market," Chirac said.

The new laws were rushed through by decree, under so-called "emergency procedure" introduced last month to allow the government to enact employment legislation without consulting lawmakers.

By cutting the cost and red tape associated with layoffs, ministers hope to remove a major obstacle to job creation. The main French employers' group, Medef, has long cited the heavy cost of cutting jobs in France as a deterrent against hiring.

France's jobless rate fell in June for the first time in four years but remains a major drag on the economy at 10.1 percent — well above the government's earlier 9 percent target for the end of the year.

Other measures introduced Tuesday include government funding to help the smallest companies hire extra staff and a euro1,000 (US$1,220) tax credit for young workers who take jobs in sectors suffering from labor shortages.

But unions and opposition leaders predicted that the new measures would undermine working conditions and confidence while failing to creating new jobs.

"If we want to create jobs, we should be creating economic activity, not new types of contract," said Socialist Party spokesman Julien Dray in an interview with France Inter radio.

"This will increase job insecurity, not job creation."

The left-wing CGT union, France's second largest, vowed to organize street demonstrations against the new measures next month.

In comments published by daily Liberation, the CGT's deputy leader, Maryse Dumas, also criticized the government for acting in "contempt" of lawmakers.

"The emergency procedure is not a sign of the government's strength," she said. "On the contrary, it's an illustration of its unpopularity and illegitimacy."

Source: Associated Press

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