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France pushes through reforms

Peter DahlFebruary 17, 2015

In a rare move, French Prime Minister Manuel Valls has pushed through controversial economic reforms meant to jumpstart the country's anemic economy. The opposition has threatened a no-confidence vote.

French Prime Minister Manuel Valls
Image: Getty Images/P. Kovarik

French opposition lawmakers are up in arms after Prime Minister Manuel Valls on Tuesday decided to bypass Parliament and push through a highly controversial package of business-friendly economic reforms without a vote.

The rare move came just minutes before the National Assembly was scheduled to vote on President Francois Hollande's flagship reform bill. Valls said he was not willing to "take any risks," as the government in Paris was struggling to secure the majority needed to pass the lower house, amid stiff opposition on both sides of the political aisle. Polls, however, show that 60 percent of the population back the reforms.

"This legislation is important, even essential, to relaunch growth, create employment and overcome certain blockages in our economy," he said. Europe's second-largest economy has seen unemployment stuck in the double digits and growth stranded at 0.4 percent for the last three years. Most economists believe a growth rate of around 1.5 percent is required to create jobs.

Vote of no-confidence

The decision to circumvent Parliament sets the stage for a vote of no-confidence. The right-wing opposition UMP party has already vowed to file a censure motion. However, analysts say it is highly unlikely that it would gather enough support to overthrow the socialist government, since it would require a sizable portion of leftist rebels to jump ship and risk their own seats.

"There's almost no risk" that the government would lose a confidence vote, said Philippe Braud, a political analyst, adding that the procedure was " perfectly constitutional."

Reform, not revolution

President Francois Hollande has hailed the landmark reform bill - dubbed the "Macron Law" after 37-year-old banker-turned-economy-minister Emmanuel Macron - as a much-needed move to revive France's economy, which has all but flat-lined. By passing the legislation by decree, he is signaling to the European Commission that he will do anything in his power to jumpstart growth. In just 10 days, the EU's executive body is set to rule on whether to sanction Paris for failing to meet its deficit target.

While the reforms are a far cry from a second French Revolution, free-market proponents hail the bill as a breakthrough in a country where labor unions are so powerful they are almost seen as a separate branch of government. In the weeks leading up to the scheduled vote, several unions had been pounding the streets in protest.

The reform package would leave untouched France's 35-hour work week, the minimum wage as well as employment protection rights. Instead, it is looking to bolster jobs and boost spending by extending the number of Sundays that shops are allowed to open from a current maximum of five per year to 12, shortening dismissal procedures, deregulating legal and notary professions, as well as opening up long-distance bus routes to more competition.

In designated "international tourist zones" - from Paris' Champs Elysees to the French Riviera - shops would be able to stay open until midnight, seven days a week. Additionally, employees working between 9:00 pm and midnight will receive double pay, while transportation and childcare costs will be covered by their employer.

These measures come on top of a package of tax breaks known as the Responsibility Pact, which would see businesses commit to job creation in return for tax cuts worth up to 40 billion euros ($45.5 billion) by 2017.

Too little, too late

Still, several economists have criticized these steps as a piecemeal approach that will do little to "change the face of France," as Societe Generale analyst Michel Martinez put it.

"We need five to 10 such reforms" to see substantial growth, said Pierre Gattaz, head of the powerful MEDEF business lobby, expressing disappointment that nearly 200 hours of parliamentary debate and more than a thousand amendments had watered down the reform bill that is meant to drag France out of its financial rut.

Nonetheless, Hollande appears to have staked his presidency on these reforms, saying that he will not seek re-election in two years if he does not bring down unemployment.