France: Major labour market reform package announced - Rabobank

Analysts at Rabobank points out that the French government announced its major labour market reform package - an important point in Macron’s still-young presidency.

Key Quotes

“The plans reduce severance pay by capping damages workers can claim in courts from employers. It also liberalizes bargaining over pay and hours between unions and firms at the firm level to a large extent, especially for firms smaller than 50 employees (95% of French companies). Moreover, it reduces the amount of obligatory work councils for firms from three to one. The reforms mark an important and large step in the right direction for the French economy.”

“Rabobank’s Daniel van Schoot expects the package of reforms to boost business confidence further in the short-term. This may trickle down to smaller and medium firms, increasing their hiring and thereby employment, although it may take a while and the full extent of this will only become visible after a year or so, according to Daniel. Some unions, both large and small, announced strikes on September 12 to protest against the reforms. But they are not united and therefore are unlikely to alter the package. Daniel also pointed out that Macron enjoys strong support from parliament where his party holds a large majority. Macron’s popularity has plunged at record speed, but the opposition is so balkanized it will not pose a threat to him for anytime soon. The combination of the reforms and cyclical tailwinds from the rest from the Eurozone may improve Macrons fortunes, Daniel concludes.”