Jobs crisis first big test for firebrand French leftist

PARIS Fri Jul 27, 2012 9:35am EDT

Arnaud Montebourg, France's Minister for Industrial Recovery, attends the ministers' question session at the National Assembly in Paris July 25, 2012. REUTERS/Charles Platiau

Arnaud Montebourg, France's Minister for Industrial Recovery, attends the ministers' question session at the National Assembly in Paris July 25, 2012.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - Arnaud Montebourg, a tousle-haired leftist with a fiery streak, endeared himself to French TV viewers last year when he used a debate among presidential contenders to demand an end to the jobs pain he says globalization has inflicted on France.

Nine months on, as the grandly titled Industrial Renewal Minister, Montebourg is grappling with a swathe of layoffs as the new Socialist government is put to the test over its election pledge to bring down unemployment.

His tactic of venting anger at company bosses plays well with the public but offers no long-term solution to 10 percent unemployment or the loss of 13,000 jobs at car maker Peugeot and telecoms group Alcatel.

Stuck managing a crisis that may have barely begun - trade unions expect tens of thousands more job cuts in the months ahead - his finger-pointing has only drawn attention to the government's dearth of ideas for bolstering France's waning industrial competitiveness.

The left-wing solutions Montebourg used to advocate, such as massive state investment, are seen as unworkable with government coffers depleted by three years of economic crisis that have bloated the public debt and put Hollande under pressure to trim the deficit fast.

"With a title like 'industrial renewal minister' you can't just complain that companies aren't doing what they should, you have to be the one putting things in order," said Christopher Bickerton, a Paris-based political scientist.

"People can go back to Montebourg's old speeches and say: okay, now that your party is in power what are you going to do?"

The government's plans to step up investment in green industries and make it harder for profitable companies to fire workers are seen as falling well short of what is needed to return the industrial sector to health - namely measures to lower painfully high labor costs.

Jobless claims have risen steadily for 14 months and this week hit their highest in nearly 13 years. Analysts expect unemployment to keep rising until at least the middle of 2013.

Among other jobs at risk are at least 1,000 at troubled poultry group Doux, a family firm now operating under court administration and awaiting a takeover.

As anxiety grips French workers, opinion polls show Montebourg -- a dapper 49-year-old former lawyer with big political ambitions -- has never been so popular.

But, short of convincing unions to accept painful labor market reforms to give employers more flexibility that even the conservative previous government balked at, he could find himself the fall guy for President Francois Hollande's shaky-looking pledge to revive industry.

"This job is a bit of a poisoned chalice for Montebourg," said Bickerton, an associate professor of international relations at Sciences Po university. "He is really on the rack right now and this will be a real test of his ideas."

However, since he took up his post, Montebourg has dropped his hard-left protectionist stance and offered up little by way of new ideas.

Hollande will make a show of support for Montebourg on Friday when he accompanies him on a visit to a research site of car parts maker Valeo, just west of Paris, which has been hit hard by tumbling car sales in Europe.

"PHONEY MEASURES"

That slump has hit Peugeot, whose heavy first half losses this week followed the announcement in mid-July that it would cut 8,000 jobs in France.

Montebourg's response was to berate the firm's main shareholders, the Peugeot family, in an outburst opposition lawmakers said was unseemly for a government minister.

The puny aid plan for the car industry he unveiled - Montebourg announced higher subsidies on both electric cars and hybrids - underscored the limited options open to national governments.

Labor Minister Michel Sapin weighed in saying the two-month-old Socialist government could not work miracles overnight but that the creation of 100,000 state-subsidized jobs next year, fulfilling a campaign promise, would ease the blow from industry cuts.

Opposition conservatives say artificially creating jobs cannot make up for a lack of new private-sector employment and that cash rebates cannot make up for waning consumer demand.

In a throwback to his assertion during last year's Socialist Party primary that Chinese firms using cheap labor meant unfair competition, Montebourg also said the government may seek EU action over an influx of low-cost South Korean cars.

But France cannot flout free trade rules any more than it can realistically pour money into struggling private companies.

Some economists say the crisis offers Hollande the opportunity to tell unions that the only way out of the doldrums is to drive through reforms now to bring labor costs down to the level of the rest of Europe.

Yet fury over job cuts make this an inauspicious time to push for more labor flexibility. France's stretched public finances also make this a tricky time for the government to trim companies' social welfare levies, which would be another possible method of easing labor costs.

"Arnaud Montebourg is a liar and is proposing phony measures," SIA union member Tanja Sussest said of Montebourg's auto sector plan during a protest outside Peugeot headquarters.

Hollande, whose popularity ratings have dropped to as low as 53 percent largely due to public gloom over the economy, has mostly stayed away from the eye of the storm and left Sapin and Prime Minister Jean-Marc Ayrault to support Montebourg.

He backed Montebourg's stance on Peugeot management, however, in a July 14 TV interview in which he accused the car maker of lying over its intentions and said the state would not stand idly by as it slashed jobs.

(Additional reporting by Emile Picy and Gerard Bon; Editing by Jon Boyle)

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