French economy minister Emmanuel Macron’s “Law on Growth and Activity,” which was presented in cabinet on December 10th, deals with so many elements of the French economy and in such piecemeal fashion that it has been labelled “baroque,” “an omnibus,” and a “grab-bag.”
Better known as the “loi Macron,” the legislation seemed to melt away during the drafting process, as the government gave in to demands of special interest groups, including pharmacists, who wanted their special status to be protected, and greens, who opposed a plan for storing radioactive waste.
"The ambition [of the law] is to give vitality back to the French economy," Macron pleaded at a joint press conference with the prime minister, Manuel Valls. "The spirit of this law is above all to be practical. This law takes doesn't take anything from anyone. It is good for the economy."
Economists doubt the loi Macron will significantly increase growth. Nor will it revolutionise the French economy, mainly because "it does not attack the fundamental problems," says a prominent liberal economist, Nicolas Baverez.
The government has so far stuck to its guns on the most controversial aspect of the law: an extension of Sunday trading. At present, shops are allowed to open on five Sundays a year. The loi Macron would increase that to 12.
The ruling socialist party wants Sunday trading to be limited to seven times a year, and they are expected to prevail when the law is debated in parliament from January 22nd.
Valls says he is confident the law will pass, but some commentators predict the government may have to invoke article 49.3 of the constitution, which allows it to pass legislation without a vote. Macron will reportedly not attend the prestigious Davos forum in Switzerland so that he can enable defend the law in the National Assembly.
An Ifop poll showed that 75 per cent of Parisians want shops to open on Sunday. Yet Marie-Noelle Lienemann, a socialist senator for Paris, said the draft law “calls into question all the historic battles of the left for better working hours and night and Sunday labour”. Both Valls and Macron reject attempts to portray the law as what Valls called “a debate of civilisation”.
They received a nasty surprise when Martine Aubry, a former leader of the socialist party and the mayor of Lille, published an opinion piece on Sunday trading in Le Monde, concluding with the words: "I will fight this regression for our society on the national level, and in my city."
Aubry called the debate over Sunday trading "a moment of truth concerning the only worthwhile question: what kind of society do we want to live in?" Anne Hidalgo, the socialist mayor of Paris, and the far left leader Jean-Luc Mélenchon also oppose extending Sunday trading.
“The reality of French society is that 30 per cent of employees already work on Sunday,” Macron said in defence of his law. “The reality of French society is that people want to go shopping on Sunday. The big internet companies make between 20 and 25 per cent of their profits on Sundays.”
Valls said it was a question of attracting foreign tourists. “Do we want millions to stay in Paris on Sundays to go shopping, or do we want them to go somewhere else?”
Call for liberalisation
The EU Commission and the IMF believe strongly that regulated professions such as notaries, lawyers and pharmacists should be liberalised. A June report by the commission stated that “improving competition in
France
is the reform which would would most increase GDP within five years.” The continuation of
Numerus
Clausus
– limiting numbers – “still constitutes an impediment to access to services,” the commission noted.
Physical therapists, podologists, bar owners, plumbers, locksmiths and surveyors are a few of the 37 professions, employing 1.1 million people, which the finance ministry identified as benefiting from special regulations that increase their profit margins.
Macron’s law attempts to reform only the legal professions (notaries, bailiffs, lawyers, auctioneers). They marched across Paris on December 10th, in protest at his bid to open up these fields to new graduates and to lower their fee schedules.
The law does not take on the most explosive of the protected professions – taxi drivers. Though reform has been discussed for decades, French politicians are cowed by the drivers' ability to paralyse their cities. The drivers pay up to €250,000 for a licence, and have fiercely opposed all attempts to liberalise the profession. Hence the chronic shortage of taxis in Paris.
The law foresees the reform of the Conseils de prud'hommes (labour relations boards), which currently take more than 15 months on average to settle cases of disputed firings. The boards, in which management and unions are represented, have until now been seen to favour employees. Trade unions oppose their reform.
French bus companies have been severely restricted to prevent them threatening the monopoly of the railway company SNCF. Coaches were allowed to drop passengers elsewhere in France only if the coach's final destination was outside the country.
As a result, only 110,000 French people travelled by coach in 2013, compared with 30 million in the UK and 32 million in Spain.
“At present, many French people are too poor to take the train, which is too expensive,” Macron says. “Liberalising coach transportation will benefit families of modest means.”
The loi Macron also allows for the partial privatisation of between €5 billion and €10 billion in state-owned companies over 18 months. The recent sale of 49.9 per cent of the Toulouse-Blagnac airport concession to Symbiose, a Chinese consortium, for €308 million was merely the first example; the airports of Lyon and Nice, and utility networks, may follow.
The Financial Times denounced the French scheme as "illusionary," since the government intends to sell stakes but keep its voting rights intact.
“This draft law on growth and activity strengthens the policies we’re carrying out,” Valls said, referring to three earlier pieces of legislation: the “law on securitisation of employment”, and the CICE and “responsibility pact”, which will refund a total of €41 billion in tax credits to French businesses.
Ignores flaws
At best, analysts say the loi Macron is a tiny step in the right direction. Yet it addresses none of the fundamental flaws of the French economy: a frozen labour market, excessive taxation and
réglementations
(laws), and the highest social spending in the world, at 32 per cent of GDP.
In the past Macron has spoken of revoking the 35-hour working week, but he didn’t address the question in his law. Valls recently rejected the idea of a “unique contract” that would close the abyss between the “CDI” (permanent contract) and CDD (short-term contract).
"Labour laws are so complex that they prevent hiring," says Baverez, the economist. "The labour market is extremely segmented, between a hard-core of employees who are over-protected and the larger number of workers who are extremely precarious. We must accept more flexibility."
According to Baverez, the François Hollande administration’s policies have destroyed growth. For example, the “loi Duflot” on rent control led to a dramatic decline in the construction industry.
Even taking account of the CICE tax credits, Baverez says, tax on business has increased by €22 billion since 2012, and is set to rise another €4.5 billion in 2015. The administration has hired more civil servants and generalised the tiers payant system, whereby the state pays all medical costs directly.
The new loi sur la pénibilité establishes a "lifetime account" for workers in bakeries, factories and building sites. Implementing it is expected to cost employers up to €3.5 billion.
Employers will be required to keep records of work in extreme temperatures, under water, at night, noise, awkward positions and machine vibrations. Those who work in difficult conditions will retire early. It’s a way of giving back to the trade unions the years that were added in Hollande’s timid reform of the pension system.
Avoid sanctions
The loi Macron is widely seen as a sop to the
European Commission
, in the hope it will persuade Brussels not to sanction Paris for excessive deficit spending when its 2015 budget is reassessed next spring.
“The EU Commission and our partners have given up all hope of France respecting its budgetary commitments,” Baverez says. “This draft law is a decoy, meant to convince them that France is undertaking structural reforms, which is not the case for a moment.
“Not only are labour costs and flexibility in the labour market, competitiveness and the reform of unemployment insurance, healthcare and pensions not addressed, they’ve been explicitly excluded.”
Yet the EU will never call France's bluff, he says. "No one wants to precipitate another euro crisis. France practise a dual blackmail. It's too big to fail, and it tells the commission and Germany that if they punish France, it will play into the hands of the National Front."
