* Valls can't afford to backtrack in face of worker action
* Question of credibility: "We have to pass reform" - govt
* Focus on big economic reforms, avoiding marginal issues
By Alexandria Sage
PARIS, June 22Manuel Valls, the tough-guy prime
minister named by Francois Hollande to speed up France's
economic reforms, is facing his trickiest challenge yet as
striking railworkers, rebel back-benchers and even angry actors
test his resolve.
Whether Valls stands firm or not in coming weeks could
determine whether Hollande achieves his aim of reversing the
decline in French industrial competitiveness and so reviving the
euro-zone's second largest economy.
"This is an important moment. Are we reforming? Are we
advancing? Or can we no longer do anything?" a source in
Hollande's office said of the challenge facing Valls.
"It's a question of credibility. We must pass our reforms,"
the source said of projects which range from efforts to bring
the public deficit back to within EU limits to a far-reaching
simplification of France's labyrinthine local government.
The role of French prime minister is one of the hardest in
European politics: to take the flak for the president and sort
out messy domestic affairs, leaving the head of state to set the
strategic direction of the country on the international stage.
Many come woefully unstuck - the most spectacular example of
which was conservative premier Alain Juppe, forced to abandon
welfare reforms after mass strikes in 1995 that turned into the
biggest social conflict since the May 1968 protests.
Hollande's first prime minister, Jean-Marc Ayrault, lasted
barely 18 months before being jettisoned. He shrunk back from
pushing through tax reforms in the face of public protests.
Valls, appointed in April following a disastrous showing by
the majority Socialists in local elections, has already
"succeeded in restoring the credibility of the prime minister's
actions," said Martial Foucault, the head of the Cevipof
political think tank.
"He's someone capable of making others respect discipline
and governmental cohesion," Foucault said. "And that's new."
During his spell as interior minister, Valls, 51, topped
opinion poll ratings for hard-line pronouncements on crime.
But the stakes as premier are higher. Any sign of weakness
today could encourage opponents to seek to derail more vital
reforms ahead - be it a supply-side "responsibility pact" that
lowers employers' taxes in exchange for hiring guarantees, or
efforts to trim France's high public deficit and debt.
The railway strike, which three out of four French voters
oppose, has helped Valls burnish his image as a no-nonsense
politician in the vein of Tony Blair, the former British prime
minister, who is unafraid to tackle painful reforms.
The government is trying to push through a restructuring of
the rail sector that pre-dates Hollande's tenure, ahead of EU
moves to inject more competition into rail networks. A bill is
being debated in parliament with a vote expected for June 24.
The reform would put state railway SNCF and track owner RFF
under the same holding company, but with separate operations.
"No one understands this strike - customers, young people,
public opinion," Valls said after meeting two unions this week
which argue the overhaul - which does not directly involve
worker pay or benefits issues - would erode working conditions.
"No one can question the government's great firmness on this
subject, as on other crucial reforms," Valls said, urging the
strike to be called off.
OUT-OF-WORK ACTORS, PARLIAMENT REBELS
So far, he is winning. While labour leaders dismissed an
amendment to the bill on Wednesday protecting the special status
of railworkers as a smoke-and-mirrors trick and vowed to strike
on, by Friday just 6.85 percent of the workforce followed them.
A dispute in the country's performing arts sector might seem
a side-show but it could spell trouble. Valls backs a reform
that would trim the higher-than-average jobless benefits enjoyed
by France's 100,000 casual arts workers, which together account
for a quarter of the state unemployment fund's deficit.
Those workers - who argue such benefits are justified by the
sporadic nature of their profession - are threatening to disrupt
this seasons summer festivals that draw hundreds of thousands of
visitors and tens of millions of euros to municipal coffers.
Despite efforts by Valls to allay their concerns, they plan
a major strike on July 4, the opening of the most prestigious
festival of them all, the Avignon Festival of contemporary arts.
"The unions know full well that the government and president
have been weakened, so they're hoping for a showdown," said
Cevipof's Foucault, of the low government popularity ratings
which Valls has been brought in to repair.
The conflicts in the rail and arts sectors provide the
backdrop for a further clash in coming weeks - this time between
Valls' government and his own Socialist lawmakers.
A supplementary bill paving the way for a further four
billion euros of public spending cuts is to be voted to help
France push down its public deficit as promised to EU partners,
while a separate bill will offer payroll tax cuts to firms.
The left of Valls' Socialist party - and in particular a
core of 41 rebels - are seeking to water down the spending cuts
and argue more is needed to help the poor. They are unimpressed
with a promise to extend tax relief to 4 million poor households
in 2014, half a million more than initially announced.
"It's not that we don't hear them, that we can't discuss it
with them, but they are after all a minority," said the source
in Hollande's office, explaining Valls' determination to push
the economic reforms through.
Finding himself prime minister at the midway point of
Hollande's five-year term, Valls has little time to act.
He will thus seek to avoid becoming sidelined by marginal
disputes over protected interests, while steering clear of major
social issues dear to the French Left but divisive, such as the
gay marriage law passed last year despite fierce opposition.
"Manuel Valls has understood that pragmatism in 2014 means
the economic question, and that means re-establishing public
finances and making France more competitive," said Foucault.
The question - as past French prime ministers have found -
is how far and how fast to go.
"The government is being authoritarian," Jean-Claude Mailly,
head of the Force Ouvriere union said last week.
"If this confrontational attitude carries on, then good luck
in trying to govern in future ... because it's going to create a
climate of hate."
(Additional reporting by Emmanuel Jarry and Elizabeth Pineau;
Editing by Mark John and Mark Potter)