No Champagne for Sarkozy

Posted in Europe | 05-May-08 | Author: Katrin Bennhold| Source: International Herald Tribune

President Nicolas Sarkozy of France speaking in Paris April 2008.

PARIS: A year ago, Nicolas Sarkozy had it all: the French presidency, a 65-percent popularity rating, a comfortable parliamentary majority and an economy growing at a respectable clip.

But one year on, his popularity has slumped to 32 percent, some lawmakers in his center-right camp are restive, and tightening credit and growing inflation have gnawed at growth and morale.

Sarkozy's first 12 months in power have been as turbulent and highly charged as the man himself. Ambitious, eloquent and unconventional, he also has been prone to crowd-pleasing retractions, fits of temper and errors in judgment, notably the flaunting of his romance with the Italian-born former supermodel Carla Bruni, now his third wife.

The president still fascinates France, the French and many beyond, and with four years to go in his five-year term, he has every chance to rebound.

But so far the promised break with the past - abolishing the 35-hour work week, for example, or making it significantly easier for companies to hire and fire - has not occurred. If Sarkozy has done more than his critics say and more than his immediate predecessors did, he also has done far less than he promised.

"There has been a lot of activity but not many results," said Elie Cohen, a member of the Council of Economic Analysis, an independent panel of economists that advises the prime minister's office.

"He raised expectations in France and abroad," said Cohen. "People thought: if anyone can change France, this guy can. Today people are no longer sure."

Nowhere did Sarkozy, a man of seemingly boundless energy with no time for taboos, raise expectations more than on the economy. "Work more to earn more" was his favorite campaign slogan. From labor unions to taxi drivers, no special interest group seemed safe from his reformist zeal.

He moved fast on some fronts, limiting the overall personal tax burden to no more than 50 percent and increasing a tax credit for corporate research and development. A merger of the unemployment benefits office with the job placement authority is under way, creating job centers that for the first time will make financial support conditional on taking job offers. Another measure, obliging unions to obtain minimum backing in company elections before negotiating deals on behalf of workers, could make them more representative.

But most reforms have been half-hearted and costly.

Take his most symbolic victory: a deal to end special retirement privileges for a powerful bastion of half a million public-sector workers that scared off successive presidents. This apparent triumph has been impossible to evaluate. The state-controlled companies affected, including Électricité de France and the rail company SNCF, have not divulged the overall cost of their concessions.

Another campaign pledge, to replace France's multitude of work contracts with a single, more flexible one, has vanished entirely. Instead, Sarkozy is adding another type of contract that allows companies to lay off workers more easily - but only in exchange for higher benefits.

Most strikingly, perhaps, Sarkozy never abolished the 35-hour week, a Socialist law that has become emblematic of the complex French rules on labor.

Rather than raising or scrapping the work-time limit, Sarkozy has created complex incentives to ignore it: a tax break on overtime, costing the state ?6 billion a year, or nearly $9.3 billion, and a law forcing companies to pay workers who prefer cash to extra time off.

As François Vergne, a labor lawyer in the Paris office of the law firm Morgan, Lewis & Bockius, put it: "The 35-hour week is not dead, it is just paid better."

On factory floors and in boardrooms, the changes were welcomed, although not as the revolution that many had sought. "A bonus," said Laurence Parisot, president of the Medef, France's biggest employer federation. Clara Gaymard, managing director of General Electric in France, was less diplomatic: "This is not the real reform of the labor market we expect."

Half of all businesses have made use of the overtime legislation since it took effect in October, the finance ministry says. Among these is a small electrical installations company, Pelatis, in Les Mureaux, a 45-minute train ride from Paris.

In a spreadsheet on his computer, the chief executive of Pelatis, Michel Sapranides, has meticulously recorded 3,355 hours of overtime for his 40 staff members since October. That is a third more than in the six preceding months, he said, a boost that helped Pelatis increase revenues by 15 percent.

"I used to have terrible problems getting people to work overtime. I don't have that problem anymore," said Sapranides, who is still adjusting to French labor rules after four years as a manager in the United States and China for the engineering giant ABB.

But soon he may face another problem: his workers have been putting in so much overtime that they risk exhausting the company's annual allowance by the summer. He has just written authorities asking to double the allowance.

One of his electricians, Joaquim Teixeira, says he has put in an average of 40 hours a week since October. The extra hours have earned him an additional ?2,159, or $3,331, over the past six months - ?464 more than before the tax break.

"I don't need the 35-hour week, I would rather make more money," Teixeira said while working on a knot of ceiling cables in an unfinished office.

For Laurent Wauquiez, the French minister of state for employment, Teixeira's remark proves that the government is on the right track.

"France is changing," said Wauquiez, who at 33 is himself a symbol of change: he is the second-youngest member of the government in a country where the average age of ministers has tended to be above 50.

"With the overtime we are changing mentalities," he said. "The next step is to get rid of the 35-hour week. But that doesn't happen overnight - or over one year."

Margaret Thatcher overhauled Britain only in her second term as prime minister. The same went for Gerhard Schröder when he was the German chancellor.

"Don't forget," Wauquiez added, "we've only been here for a year."

But the conditions for further reforms have become more difficult.

It's not only the unions and the opposition Socialist Party that have vowed to resist changes still in the pipeline. Ever since a clear defeat in local elections in March, Sarkozy's own center-right party has become less eager for unpopular measures.

Slowing growth and rising inflation have complicated Sarkozy's call for change. According to Wauquiez, many voters may not have realized what they were voting for. "The French did not so much vote for reform, they voted for change," he said.

In recent weeks, high school students have protested plans to trim back the civil service, and labor unions are planning a mass demonstration on May 22 against plans to make people work longer for pensions.

With food and energy prices surging, workers like Teixeira say they barely feel the impact of lower taxes on the overtime pay in their pockets. He grumbles that Sarkozy should "do more" to raise purchasing power, the No. 1 concern in opinion polls.

A weaker economy has also pushed up the government's already substantial budget deficit, leaving little room to buy off anti-reform protests.

Amid such difficulties, the signals from Élysée Palace have been mixed.

In February, for example, a protest by taxi drivers was enough to convince Sarkozy to abandon plans to lift restrictions on certain protected professions. But then in a television interview April 24, the president vowed to accelerate changes.

His prime minister says that companies and workers will soon be able to negotiate work agreements outside the 35-hour law. His social affairs minister has promised to press ahead with the controversial pension-reform plans, and the finance minister has unveiled plans to deregulate the retail sector.

Some observers predict that Sarkozy, mindful of the inaction of his predecessor and rival, Jacques Chirac, will resume vigorous reforms. Others point to a craving for popularity that has been characteristic of his career so far.

"The big question," said Cohen, the economic analyst, "is whether he will he go for legacy or a second term."