Measures unveiled by the French President include more flexible work contracts and putting a cap on redundancy compensation. The euro area stability criteria stipulated in the Maastricht Treaty are guiding Macron’s march forward.

GD/AD – 07/2017

Despite having a considerable majority in parliament, the new president wants his labour reforms to be pushed through in a series of decrees and thus avoid closer involvement from parliament. Given the lack of domestic investment and high long-term unemployment, Emmanuel Macron had already called for more flexibility in employment contracts during his election campaign. Now that he is in office, he should be able to go even further with his reforms. 

In principle, work agreements on working conditions, protection against unfair dismissal and possible job limitations at industry level are agreed between employee representatives and employers. Generally speaking, there was very little room to manoeuvre in the past because of opposing interests. However, many aspects of the reform project are still unclear. 

Nevertheless, what is clear is that damages paid as a result of unfair dismissal are to be capped and fixed-term employment contracts, which are relatively uncommon in France, are to be limited to specific internal company projects by means of permanent recruitment.  

Observers expect that as more details come to light there will be significant resistance from outside parliament from the French trade unions which are traditionally very powerful and partially right-wing. In their ranks are many activists whose political parties, the socialists and the radical left-wing, are very critical of the “Macron Project” because it has almost destroyed their once powerful parliamentary base.  

It is worthy of note that Macron has started with rather general changes to framework conditions and not just with a ‘bang’ by abolishing France’s 35-hour week on full pay, something which is highly questionable given France’s weak economy.  

There are also serious problems in terms of France’s deficit. In his election campaign, Macron promised a ‘quick’ reduction in annual new debt to the Maastrich limit of 3 percent of GDP. However, according to the European Court of Auditors the current value is closer to 3.2 percent rather than the 2.8 percent that Macron hoped for. According to the European Debt Clock, French national debt grows by a considerable 335,000 euros every five minutes; in the same period of time, Germany reduces its debt by 175,000 euros.