French minimum wage rise turns sour for Hollande

PARIS Thu Jun 28, 2012 3:40pm EDT

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PARIS (Reuters) - French President Francois Hollande's decision to raise the minimum wage in the midst of a European austerity drive is backfiring against him as trade unions, workers and left-wing allies criticize the increase as too miserly.

Hollande, in office for six weeks, went through with a campaign promise to help low-earning workers on Tuesday when he announced the 2 percent rise, bringing the monthly wage after tax to 1,118 euros - or an increase of 21.50 euros.

The decision was meant to show that Hollande's Socialist government could stick to its pledge to raise workers' living standards even as countries in southern Europe suffer harsh austerity and economists call for wage constraint in France.

But rather than winning Hollande points for boldness, the cosmetic hike backfired.

A survey by pollster CSA for communist daily Humanite showed that 82 percent of the French found it "insufficient", while criticism rained down upon Hollande's government.

The harshest attacks came from the far left. Popular leftist leader Jean-Luc Melenchon, who won 10 percent of votes in the first round of France's presidential election in April, called the increase "unacceptable".

"It turns my stomach to see this situation," Melenchon, who previously called for a 30 percent increase, told BFM news television on Thursday. "This is a candy bar. You can't even by a baguette every day, maybe two in a week. You can buy yourself a cup of coffee per week."

Among unions, reactions were also negative. Bernard Thibault, head of the hardline CGT, told RTL radio that his union was "very unsatisfied", while a spokeswoman for Force Ouvriere said the increase was a "deception that would generate frustration and anger among workers".

The Socialists enjoy an absolute majority in parliament and can shrug off criticism from political opponents. But they risk losing support with an electorate largely unprepared for sharp cuts in public service budgets and labor reform.

Tensions with unions are also unwelcome, days before a July conference at which Hollande will try to broach the sensitive topic of labor reform with hardline groups, two of which are staunchly opposed to any change in the labor code.

With France tied to deficit-cutting targets, the meagerness of the hike exposed how little margin Hollande has to increase outlay at a time when growth is flat, unemployment hovers at 10 percent, and May consumer spending is seen at zero.

In a foretaste of harsh measures to come, Prime Minister Jean-Marc Ayrault announced that public sector staff would be reduced at a faster pace than previously expected and operating costs slashed by 7 percent next year.

Ayrault wrote in a letter to ministries that, despite the cuts, the government would pursue plans to create 60,000 new teaching jobs over its five-year mandate - a move criticized as impractical and expensive by the opposition.

Widespread anxiety about France's economy and the European debt crisis have cut Hollande's post-election honeymoon short. His approval rating is between 55 and 60 percent - a low level compared to other presidents at the same point of their mandate.

(Editing by Daniel Flynn)

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