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Cablegate: Raffarin Moves to Dampen Discontent Before May 29

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PARIS 001833

SIPDIS

SENSITIVE

DEPT ALSO FOR EUR/WE, DRL/IL AND INR/EUC
DEPT OF LABOR FOR ILAB
DEPT OF COMMERCE FOR ITA

E.O. 12958: N/A
TAGS: ELAB FR PGOV PINR PREL SOCI
SUBJECT: RAFFARIN MOVES TO DAMPEN DISCONTENT BEFORE MAY 29
REFERENDUM

REF: PARIS 1649

SUMMARY
--------
1. (SBU) Prime Minister Jean-Pierre Raffarin agreed to open
wage negotiations with public sector unions following a
relatively strong turnout for the general strike on March 10
(reftel). Raffarin also called on French corporations "to
share the wealth" with private sector workers following a
year of record profits. Speaking in a national radio address
on March 13, Raffarin did not quantify his proposals but the
unions welcomed Raffarin's gesture as a first step toward
wage increases. Raffarin, however, insisted that he intended
to move forward with two controversial proposals: increasing
the work week beyond the current 35 hours, and reform of the
national education system. With the referendum on the EU
Constitution looming May 29, the government hopes that
proposals to open wage negotiations with public sector
workers, along with other concessions to private sector
workers, should put the government in a stronger position
going into the final stretch of the campaign for the EU
Constitution. However, concessions might have the opposite
effect, emboldening the unions to continue their
demonstrations and strikes. Those angered by the reforms
could use the EU referendum to cast a "sanction vote" against
the government. END SUMMARY.

OPENING TALKS WITH PUBLIC SECTOR WORKERS
----------------------------------------
2. (U) Three days after the relatively strong turnout of
public and private sector workers for the general strike on
March 10 (reftel), Prime Minister Jean-Pierre Raffarin
announced the reopening of wage negotiations for public
sector workers in a radio address March 13. The talks will
begin March 23, and will affect public sector salaries for
2005 and 2006. The government, which had previously
announced a minimal increase of 1 percent for public sector
salaries in 2005, has limited room to maneuver. France, in
accordance with Stability Pact guidelines, is committed to a
public deficit of 2.9 percent at the end of the year,
compared with 3.7 percent in 2004. In order to achieve this,
government forecasts for 2005 initially assumed an economic
growth rate of 2.5 percent and cuts to state expenditures.
At a press conference March 16, Finance Minister Thierry
Breton admitted that France's actual growth rate for 2005
would likely be closer to 2 percent. If PM Raffarin bows to
union demands for another 1 percent increase to public sector
salaries, France's 2005 government budget deficit will again
likely breech EU Stability Pact guidelines.


CALLING ON PRIVATE SECTOR TO "SHARE THE WEALTH"
--------------------------------------------- --
3. (U) Raffarin also called on French corporations to "share
the wealth" following a year of record profits and a strong
performance by the stock market. The head of France's
employer's association, MEDEF, immediately dismissed the
proposal, saying businesses would do what they saw fit given
their competitiveness and other market conditions. Raffarin
cannot in any way force private companies to share profits
with employees; he is proposing a plan to enhance current
profit sharing legislation, which he will unveil in an
address on March 23.

STAYING THE COURSE ON OTHER REFORMS
-----------------------------------
4. (U) In the same radio address, Raffarin reiterated that he
would continue to press for passage of two controversial
reform proposals: the first would allow workers to "increase
their purchasing power" by working more than 35 hours per
week, if they so desired; the second is a reform of the
politically sensitive national education system. Work-week
and education reforms have been the catalysts for the three
waves of strikes that have hit France over the past three
months. Both reforms are expected to be passed by the
National Assembly and Senate by the end of March.

COMMENT
-------
5. (SBU) Raffarin, along with key supporters in the
government such as Finance Minister Thierry Breton, have kept
hammering home their conviction that the consequences of
rejecting reform would be crippling. Moreover, the
apparently shrinking rate of economic growth -- announced by
Breton on March 16 -- makes the economic case for
growth-spurring reform stronger. The government expects the
demonstrations and polemics will recede once the proposed
work week and education reforms are passed by parliament.
Raffarin believes his proposals to open wage negotiations
with public sector workers, and to encourage private sector
profit-sharing programs, should put the government in a
stronger position going into the final stretch of the
campaign for the EU Constitution. However, Raffarin's
concessions could have the opposite effect, emboldening the
unions to continue their demonstrations and strikes. Should
the reform proposals bog down in parliament and/or should the
demonstrations against them continue, then the unsettled
climate of social tensions could impel many who would
otherwise vote for the proposed Constitution (and with the
government) to show their dissatisfaction by voting 'no.'

6. COMMENT CONT'D: (SBU) According to an IPSOS poll published
on the same day as the general strike (March 10), 60 percent
of French voters planned to vote in favor of the EU
Constitution. The IPSOS also showed that over a third of
likely voters remain undecided. However, a CSA poll
published on March 18 -- which took into account voter
sentiments following the general strike -- projected that
French voters would reject the treaty 51 to 49 percent. The
CSA poll seems to have registered the decidedly negative
impact the general strike has had on the public's mood. In
addition to their worries about persisting social discontent,
pro-EU politicians are worried that some unforeseen issue --
particularly in the key, final two weeks of the campaign --
could tip the scales in favor of the 'no' camp. Another
scandal, like the one which recently toppled former Finance
Minister Herve Gaymard, could trigger anti-government
'rejectionist' votes. Many point to the groundswell of
anti-Europe feeling that has accompanied objections to the
Bolkenstein directive on services as revealing the strength
of latent mistrust among the French of an economically
'liberal' Europe. END COMMENT.
Leach

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