Hollande feels the heat

Talk of economic reform is all the go in France. The good news is that, following a report commissioned by the government on reforming retirement provisions, President Francois Hollande wants to close the gap between the special perks and privileges public servants receive over those in the private sector. Even better news is that 56% of the public agree.

However, one little shadow on these good intentions is that in the same survey, fully 66% of this same public has absolutely no confidence Hollande will be able to do it!

The biggest single difference between the public and private sectors is that for those employed by the state, retirement income is based on the last six months of earnings, whereas in the private it is based on an average of the best 25 years of earnings. Hollande wants to bring the public sector back to the last ten years of salary. Then there are the “special classes” of privilege, such as train drivers, who retire at 51, or State Electricity [EDF] employees whose average  annual retirement income is double that of the private sector.

The really bad news is that the unions in all public sectors, electricity, railways, aviation, shipping, public service — you name it — are threatening war to defeat any effort to eat away at these already acquired privileges. However, for the government, the minimum reform necessary to bridge the deficit gap on financing all retirement schemes is around 25 billion euros a year.

The problem does not stop there. Real political will will be needed to break down the way the public service ferociously guards its closed-shop privileges, from the top right down to the very local commune level. The French "lack any objective analysis of public policy over the last several decades," says Laurent Bigorgne of the think tank Institut Montaigne. "As most public policy has been corrupted and then captured by those who benefit directly, nobody has any interest in change.” For instance, over 30 billion euros are sunk each year into arrangements between the unions and management for “professional development” in a  completely opaque system of mutually beneficial rip-offs.

Then there is the problem of decentralization. Inevitably, this has multiplied the levels of decision-making. At the local level, there has been an explosion of jobs and subsidies, with no chance of hauling back and reviewing this largesse. In a recent report, it is estimated that over half a million jobs were created at the local level between 2000 and 2010. The President’s lack of appetite for reform was reflected in a comment he made at the 2012 Avignon Festival, where he spoke glowingly of the generous subsidies lavished on casual “arts” workers who receive 243 days of unemployment benefits for 507 hours of work. He explained that casuals were “a pillar of the exception culturelle francaise”.

To top it off, the bloody mindedness of the unions, especially with a weak President, cannot be underestimated.

Christian Grolier, head of Force Ouvriere, a public service sector union, has declared of the six-month rule, “This is a casus belli! …One week’s blockage of the country will be effective in balancing the power in our favour.” Vowed another unionist, “We will not negotiate!”

Jacques Attali, who worked for years in the socialist government of Francois Mitterand, but who recently served on Nicholas Sarkozy’s “transpartisan” commission to free up the French economy, ominously warned in his recent book Urgences Francaises, “As far as one can see looking back, France has never reformed; it just has occasional revolutions.”

As some observers of the unions’ militancy are warning, it seems a hot summer is in the offing, and quite likely a difficult start to the new year as well.