After the crisis, Sarkozy attacks unemployment

Turning from dealing with the financial crisis, President Nicolas Sarkozy proposed new measures to tackle France's rising unemployment rate at a conference in the Ardennes town of Rethel, which suffers from chronic joblessness.


Watch our two-part debate: 'Unemployment, the rising storm'


French President Nicolas Sarkozy unveiled measures on Tuesday to protect jobs and warned companies against unjustified layoffs as evidence mounted that many workers would fall victim to the financial crisis.

News of mass layoffs at household-name French companies from carmaker Renault to mail order retailer La Redoute has put pressure on Sarkozy to match his 360 billion euro ($450 billion) rescue package for banks with a plan to help ordinary people.

Sarkozy promised to ease restrictions on the use of short-term job contracts by small and medium businesses, fund an additional 100,000 subsidised work contracts in next year's budget, extend the use of subsidised training programmes and make it easier for people to work on Sundays.

"This is the third stage in our global plan to respond to the crisis that France, along with the rest of the world, is facing," Sarkozy said during a speech at a job centre in the northern town of Rethel, which has a very high jobless rate.

The first two stages were the bank rescue package and measures to help small businesses, announced last week.

"The third stage is to mobilise in favour of employment. It concerns employees directly, especially those who feel under threat in their jobs," Sarkozy said.

Hours before his announcement, official data showed consumers were fearful of a sharp rise in unemployment and companies expected business to worsen in coming months.

"The ghost of unemployment has returned to haunt France," declared Gilles Moec, an analyst at Bank of America.


Unemployment was already on the rise before the financial crisis sharpened last month, with the latest data showing a jump in the number of jobless in August to close to 2 million. Since then, the credit crunch has darkened economic prospects.

The unemployment rate in France and its overseas territories rose to 8 percent in August from 7.8 percent in July, according to the latest official European Union data, and analysts expect much sharper increases for the rest of this year and in 2009.

Sarkozy warned companies against what he called "cynical and opportunistic strategies".

"I'm thinking of those who might take advantage of the crisis to reduce activity and staffing for reasons that have nothing to do with the crisis. Those who want to play that game be warned: the government will be ruthless," Sarkozy said.

France is struggling with a big budget deficit and Sarkozy's rescue package for banks has caused widespread surprise in the French public after he said earlier this year that his margin for manoeuvre was limited because "state coffers are empty".

Having found 360 billion euros for the banks, Sarkozy came under pressure from public opinion to help workers too.

"Some of you may wonder why we helped the banks. Why help banks rather than small and medium enterprises, which create jobs and have financing problems more difficult than for banks? Or why not share out money directly to workers?" Sarkozy said.

"To those of you who think that way, I answer that the plan (to shore up banks) is actually designed for small and medium businesses, for workers, for growth, for employment. It's not designed for banks," he said.

Data showed earlier that consumer morale in October slid back to the July level which was a 20-year low, while company managers surveyed in a quarterly report highlighted accelerating job cuts between July and September, warning of worse to come.

Reinforced by Finance Minister Christine Lagarde and Secretary of State for Employment Laurent Wauquiez, French President Nicolas Sarkozy is due to deliver a much anticipated speech in Ardennes in eastern France on the pressing employment problem.


The unemployment rate, on the decline since 2004, has suddenly shot up again, and could once again cross the two million mark before the end of the year.


For Liêm Hoang Ngoc, a Sorbonne economist close to the French Socialist Party, the government’s solutions “do not create conditions conducive to re-integration”, in helping the unemployed find steady, “long term” work.


Meanwhile Nicolas Bouzou, a liberal economist, fears that the government’s proposed measures may weigh too heavily on public finances. But the government, he assures, has little margin to maneuver in the current situation to stabilize the rate of unemployment.



The return of ‘state-aided contracts’ (‘contrats aidés’)


The “plan of action” according to Employment minister Wauquiez must focus on three main points:


- Pursue structural reforms, such as the creation of a national “employment centre” after merging the national unemployment organizations UNEDIC and the ANPE employment agency.


- Promote “jobs of the future” in the service sector, “green” professions in connection with the Grenelle environment accords, as well as technology jobs.


- The key measures favour the return the ‘state-aided contracts’ (‘contrats aidés’) and the generalization of ‘professional transition contracts’ (CTP)


Considered as crisis ‘air bags’, French Budget Minister Eric Woerth’s plans to create 280,000 ‘state-aided contracts’ in France should be implemented by 2009.


It’s a sign that “the government is desperate”, said Ngoc. “While we speak of returning to full employment, we also are getting ready to create temporary jobs, he added. “All of this is just a temporary patch, which isn’t going to solve the problem of re-integration”.



“Right towards recession”


Ngoc isn’t any more convinced by the transferable skills contracts (CTP), which helps employees fired for economic reasons. “Making the unemployed sign a contract for a training course has never solved the problem of unemployment”, he said.



This plan for employment aims at “deflating unemployment figures without creating long-term re-integration conditions for people weakened by the job market”, according to Ngoc. He said, “policies of cutting public spending while creating state-aided jobs leads us straight to a recession”.



“Too little margin to manoeuvre”


Bouzou, also the director of economic forecasting company Asterès, shows the same scepticism.


While he doesn’t question the principle of state-aided jobs, he feels that the situation isn’t right for a generalisation: “Public finances won’t allow us to take this policy on in a massive way”.


With times hard and coffers empty, and Bouzou recognizes that the battle for employment looks delicate for Nicolas Sarkozy and his ministers: “the government has little margin to manoeuvre in trying to stabilize the unemployment rate”.


Unemployment could soon take back its place from purchasing power at the top of French peoples’ concerns. In fact, Sarkozy’s promise to push unemployment rate down to 5% at the end of his tenure is looking “very compromised”, according to The French Centre of Economic Research (OFCE) latest rating.

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