December 20, 2012 / 2:35 PM / 5 years ago

REFILE-French labour deal far off as deadline looms

4 Min Read

* Economists say labour reform key to economic revival

* Unions, employers at odds on crucial points of reform plan

* Talks likely to stretch beyond end-Dec deadline

* Hollande pressured from both sides

By Nicholas Vinocur

PARIS, Dec 20 (Reuters) - Negotiations on labour reforms needed to boost France's economic competitiveness looked likely to be extended into next year on Thursday as unions and employers struggled to meet a year-end deadline.

Socialist President Francois Hollande has urged the two sides to reach a "historic" deal by Dec. 31 to fix dysfunctions in the euro zone's second-largest economy: a rigid job market, a complex labour code and fraught labour relations.

Hollande's push is seen as central to a wider drive to shore up the economy, tackling politically explosive social issues that generations of French leaders have avoided because of the threat of union-led street protests.

To avoid a clash, Hollande has steered clear of trying to dismantle the 35-hour work week revered by many on the left. And a government roadmap for the talks made no mention of the term "flexibility" reviled by hardline unions.

Yet the prospect of a deal to meet his ambitions appeared remote as unions rejected a new set of proposals by employers, saying it did not address their demands for short-term job contracts to be taxed more heavily than long-term ones.

"I don't think we'll have a deal tonight," Jean-Claude Mailly, head of the hardline Force Ouvriere union, told France Info radio. "We'll need time to examine (a new deal draft)... There may well be new negotiating sessions in January."

With plenty of ground left to cover, unions and the government have played down the importance of a year-end deadline and hinted that talks may to stretch into early 2013.

Labour Minister Michel Sapin said on Wednesday that "all the conditions for an agreement" were present - though he did not comment on the chances for a deal being struck in 2012.

Talks are still deadlocked over union demands to make hiring on short-term contracts less attractive for employers by imposing increased taxes or unemployment contributions.

While nearly four in five workers in France are employed on iron-clad permanent contracts, the share of those employed on short-term and temporary contracts is growing as companies turn to such arrangements to lower labour costs.

"This is a precondition for the CFDT (union) - if it's not in the text, there will be no CFDT," said Patrick Pierron, negotiator for France's largest union.

The Medef employer umbrella association has so far rejected the demand, saying small- and medium-sized businesses which tend to use short-term contracts will suffer disproportionately.

Unions are resisting employer calls for more flexible permanent contracts and for lowering legal barriers to firing, notably by capping compensation and cutting the time frame for workers to dispute their dismissal from five years to one.

Some economists say the talks are not ambitious enough, and will fail both to tackle high labour costs dragging on French exports and find the best balance between the inflexibility of permanent job contracts and the insecurity of temporary labour.

If the talks collapse or fail to produce a genuine reform, Hollande has said the government will impose changes through legislation to be introduced in parliament in early 2013.

But sending a draft law to parliament without a deal signed by unions and employers will expose Hollande to criticism from both trade unions and his left-wing allies.

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