Scoop has an Ethical Paywall
Licence needed for work use Learn More

Search

 

Cablegate: The French Referendum On the European Constitution:

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

UNCLAS SECTION 01 OF 03 PARIS 002825

SIPDIS

SENSITIVE

STATE FOR EB/TPP, EUR/ERA, EUR/WE, EUR/PPD, DRL/IL AND
INR/EUC AND EB
COMMERCE FOR NAAS
DEPT OF LABOR FOR ILAB
DEPARTMENT OF COMEMRCE FOR ITA

STATE FOR USTR

E.O. 12958: N/A
TAGS: ECON ETRD PGOV PREL ELAB PINR FR EUN
SUBJECT: THE FRENCH REFERENDUM ON THE EUROPEAN CONSTITUTION:
A PRETEXT TO BLOCK PUBLIC SECTOR REFORMS


NOT FOR INTERNET DISTRIBUTION

SUMMARY AND COMMENT
-------------------

1. (SBU) The current debate over French referendum on the EU
Constitution has highlighted France's deep-rooted economic
and social malaise. With unemployment at a five-year high
of just over 10 percent, labor groups and public sector
unions have linked outsourcing to this general malaise to
justify their "no" vote. Feeding a public fear of
outsourcing, public sector unions, who have opposed the
government's plans to cut jobs and freeze pay increases in
the civil service organized massive protests in France in
March, calling the European Constitution "neo-liberal" and
predicting it will undermine social conditions in France and
lead to even greater job losses. The government, unable to
deny that the new Constitution will bring reforms, counters
that the new Constitution would protect France's "social
model." Nevertheless, the public sector's demonstration in
March, and its influence with leftist parties highlights
France's growing social divide between the "protected" state
sector, which has successfully blocked or considerably
slowed down government efforts to implement economic and
social reforms, and the "exposed" private sector, which
looks to the government for policy initiatives and
leadership to dispel its misgivings about a more global and
deregulated world. End summary.

Advertisement - scroll to continue reading

SHADES OF MAASTRICHT
---------------------

2. (U) This is not the first time that the future of the
European Union has been exploited by France's
"fonctionnaires" to safeguard their privileges against
government plans to trim down the state sector and make it
more efficient. They disrupted the referendum on the
ratification of the Maastricht Treaty in 1992, and the
French EU Presidency in 2000, in the name of "jobs and
social rights

A CHANCE TO SAY "NO" TO FRENCH REFORMS
--------------------------------------

3. (U) Public sector unions have been looking for a
political hook to rekindle their demands for pay increases
and a lifting of the freeze on hiring. The Government
announced last year its intention not to replace 50 percent
of the civil servants who retire in 2005, i.e. 30,000 civil
servants. Furthermore, it offered civil servants a 0.5
percent pay raise, which unions said compared unfavorably
with an estimated 2 percent inflation rate. In order not to
antagonize the traditionally unruly public sector during the
campaign on the French referendum, the GOF went back on its
plans earlier this year: a pay raise was granted and civil
servant staff reduction dwindled to 7,200, including 3,000
in the state education system.

4. (U) Buoyed by their success, civil servant unions
pressed on, and on March 10, teachers, along with hospital,
postal, electricity and gas workers combined into one common
protest for "improved working conditions and purchasing
power." These wide-reaching slogans were designed to tap
into growing private sector concerns about job losses due to
company relocations and outsourcing. The French economic
magazine "L'Expansion" estimated that outsourcing from
France to destinations in Eastern Europe and Southeast Asia
cost an unprecedented 11,000 jobs in 2004, a figure "more
than enough to feed a growing social malaise."

RIDING ON THE FEARS OF A WORSENING JOB DRAIN
--------------------------------------------

5. (U) A poll jointly carried out by "L'Expansion" and
pollster CSA in October 2004 shows that relocation of French
companies or multinationals is seen as a "serious
phenomenon" by 88 percent of the French population and as a
"lasting" one by 70 percent. A third of the population
further believes that they or someone they know will loose
their job. This is considerably worse than a decade ago,
when globalization was perceived as a negative consequence
on French jobs. Globalization was demonized by French
public sector unions during the 1992 campaign on the
ratification of the Maastricht Treaty. France was then
facing an unprecedented wave of company closures and
restructurings.

6. (U) Today, many French economists stress that the fear
of relocations and outsourcing is "irrational" as they
accounted for only 1 percent of job losses in 2004. They
say this figure is more than offset by the 20,000 jobs
created by foreign investment every year. However, the
people polled show more level-headedness as to the reasons
for the relocations, according to the poll by "Expansion."
Some 74 percent believe that "something can be done to
prevent relocations," and an overwhelming 84 percent say
that the most efficient way is to lower payroll taxes.

PROMOTING TRAINING AND HIGH-TECH JOBS
-------------------------------------

7. (U) Outsourcing and relocations alone are not to blame
for job losses in France, according to French Economist Elie
Cohen. He told us recently that over the past three years
France had "destroyed" jobs in the high-tech sectors, where
it could be a leading player. He blamed the situation on a
lack of proper training and adequate funding of research.
Another French economist, Lionel Fontagne, underscored the
need for better training to allow job seekers to find work.
He further noted that preventing outsourcing and relocations
could prove harmful to French companies, in terms of
competitiveness and productivity. Companies often need a
presence near their growth markets. As a case in point,
French carmakers Renault and PSA Peugeot Citroen are aiming
their production efforts at Eastern Europe, where demand
could triple in the coming decade. Renault already
manufactures half of its vehicles outside France.

8. (U) A recent government-sponsored report on France's
declining industrial base reflects these concerns and takes
note of "signs that the French manufacturing industry is
starting to lose ground," mostly because it is not
sufficiently high-tech oriented. To support R&D in France
beyond the tradition nuclear science, aeronautics and space
activities, it calls for a "new industrial policy,"
spearheaded by a new Agency for Industrial Innovation.
Recommended by Saint Gobain CEO Jean-Louis Beffa and
approved by President Chirac, the new agency will administer
industrial initiatives associated with major technological
innovation and geared to European or other world markets.
Under the direct supervision of the Prime Minister, the new
agency will be allocated an initial budget of 2 billion
Euros in 2007. Chirac's timely support for this agency and
a pro-industrial policy appears to be at least partly
motivated by the need to promote employment on the eve of
the EU referendum.

9. (U) To address French unemployment, which has recently
exceeded the 10 percent "psychological threshold," Chirac
has asked his Minister of Employment, Labor and Social
Cohesion Jean-Louis Borloo to speed up implementation of his
"Social Cohesion" plan, a comprehensive 15.8 billion dollar
effort to simultaneously develop employment, housing and
equal opportunities over the next five years. Since the
March 10 public sector demonstrations, many of the original
ambitions of Chirac's long-time wish to "bridge France's
Social Divide," have been dropped to focus on government-
subsidized contracts and training programs to help 800,000
jobless youth, especially from "disadvantaged
neighborhoods." However, many of the jobs created will be
in civil service and public hospitals, both locally and
nationally. This defeats the original purpose of the Borloo
reform, which was to break with the "logic of dependency."

FLEXIBILITY IN THE FRENCH LABOR MARKET POSTPONED
INDEFINITELY
--------------------------------------------- ----

10. (U) Efforts to promote employment through greater
flexibility in the French job market were cut short by the
resignation of former Economy, Finance and Industry Minister
Herve Gaymard. Based on a report entitled "From employment
uncertainty to mobility," drafted by two well-known French
economists, Pierre Cahuc and Francis Kramarz, Gaymard had
decided to open up regulated professions such as
hairdressers, taxi drivers, butchers, veterinarians,
chartered accountants, physiotherapists, hotel managers,
notaries, and architects. Cahuc and Kramarz advocated that
the quota system for taxi drivers, veterinarians and
physiotherapists be lifted, and that the "excessive"
qualifications for chartered accountants, hairdressers and
butchers be removed. They estimated that between 200,000
and 500,000 new jobs could be created as a result of the
deregulation of these professions. The reform has been
shelved for the time being, given protests from a number of
protected professions, especially architects, not to mention
the extremely adverse reaction of French trade unions to the
EU Services directive -- (aka the Bolkestein directive).

WHAT HAPPENS NOW?
-----------------

11. (U) The GOF had originally wanted to make 2005 the year
of "individual freedom of choice," through greater
flexibility in work time, labor market regulations, and a
lighter, more responsive state structure to ensure "a
successful start to the second half of the five-year
mandate" of President Chirac. However, the May 29
referendum altered the French political landscape, as it
will be the last national election before the 2007
Presidential and Parliamentary elections. Chirac organized
it in the hope that his party would recover from a
humiliating defeat in the March 2004 regional elections on
the basis that "no politician could possibly oppose" the EU
Constitution. He allegedly further hoped that the
referendum would force the realignment if not the
"implosion" of the Socialist Party, coerced into choosing
between the Social Democratic pro-EU approach and the more
Marxist alternative.

12. (SBU) Instead, the old French demons of the ratification
of the Maastrich Treaty reappeared, and the announcement of
the referendum heightened protests and fears. Public sector
demands were met, subsidies to farmers, and wine growers
were distributed, and pro-active industrial policy actions
announced. The state, which should have been trimmed down,
through attrition, is now bigger than ever. The impression
that Chirac and his government lack a global vision for
France and the determination to impose it has been
reinforced, making rival presidential contender and UMP
President Nicolas Sarkozy a more viable alternative to carry
out the necessary reforms, which he claims French people are
ready to accept. If the outcome of the upcoming referendum
matches current negative predictions, Chirac will ironically
have paved the way for his political succession rather than
his posterity. As one French political commentator
succinctly put it: a "No" win on May 29 would be represent a
major blunder in the face of history, and would make for a
dismal epitaph.
Wolff

© Scoop Media

Advertisement - scroll to continue reading
 
 
 
World Headlines