VZCZCXRO8053
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHFR #1021/01 2091013
ZNR UUUUU ZZH
R 281013Z JUL 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 6850
INFO RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 001021 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB and EUR/WE 
 
E.O. 12958: N/A 
TAGS: ECON EIND EFIN ETRD PREL FR
SUBJECT: GOF MOVES BEYOND SOCIAL UNREST TO LABOR AND PENSION REFORM 
IN 2010 
 
NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) Summary: After a spring of layoffs, "boss-nappings" and 
talk of social revolution, the GOF enters the annual vacation period 
having weathered what it hopes is the worst of the economic crisis. 
President Sarkozy by most accounts has successfully managed (some 
would say co-opted) relations with the unions with a combination of 
carrot and stick.  Sarkozy's social affairs advisor told us recently 
he foresees quiescent relations with the "social partners," at least 
until November - December.  Sarkozy has deflected public anger over 
the crisis by recasting himself as a "protective leader," jawboning 
business on keeping jobs in France, espousing the benefits of the 
French social model, handing key issues to the "social partners" for 
negotiation, and, to some extent, handing over cash.  End Summary. 
 
The President's response to unrest with "social measures"... 
 
¶2.  (SBU) In an early July meeting President Sarkozy's Social 
Affairs Advisor Raymond Soubie told us the GOF was relatively 
sanguine about the government's political handling of fallout from 
the economic crisis.  After a spring of discontent, which included 
warnings from former Prime Minister de Villepin that France could be 
on the verge of a revolution, the air largely went out of various 
nascent protest movements.  Soubie credited measures taken by the 
government, including a 3-billion-euro social investment fund to 
finance employment and training measures (a trade union initiative 
approved during a social summit with trade union and employers' 
representatives) and an additional 2.6 billion euros to be disbursed 
to workers for partial unemployment, young job seekers and low 
income households.  Soubie told us he expects calm to prevail well 
into the fall, though November - December could prove challenging. 
It will take 1.5 - 1.7% annual GDP growth to turn the corner on 
unemployment, and current projections show flat growth through the 
fourth quarter, he said. 
 
¶3. (SBU) In April, he unveiled a 1.3 billion-euro youth employment 
scheme to counter soaring unemployment among people under 25.  He 
explained that his scheme intended to help 500,000 young people find 
a job and training by June 2010.  He revealed that one of his 
priorities would be to invest in "alternative training," whereby 
individuals study while also gaining experience in a work 
environment.  Soubie mentioned that Sarkozy's youth plan is expected 
to benefit some 500,000 young unemployed. It will be financed 
essentially by the State via the Social Investment Fund. 
 
¶4.  (U) The president further sought to deflect public anger over 
generous severance packages to top banking executives by initiating 
a decree on March 31 prohibiting the payment of stock options and 
bonuses in businesses receiving exceptional crisis-related State 
aid.  The decree also sets guidelines governing the setting of 
executive pay in public enterprises and businesses in which the 
State has a majority stake.  Finally, the GOF set out a requirement 
to establish an ethics committee composed of people of 
irreproachable character to ensure the necessary regulation on 
remuneration in private-sector companies.  Prime Minister Fillon 
noted that these measures placed France very far ahead of all the 
other European countries. 
 
... renewed dialog with trade unions... 
 
¶5.  (SBU)  In addition to his policies towards "the most vulnerable 
citizens, those suffering the most," Sarkozy allowed the unions to 
spearhead protest against his stimulus package in the hope that it 
would lose steam instead of spilling over into wider unrest.  "With 
their regular nationwide protests- five since the beginning of the 
year -- trade unions successfully channeled the discontent of the 
French," Social affairs analyst Guy Roux recently told us last May. 
The social affairs advisor Soubie concurred, adding that the 
president and trade unions shared the same vested interest in 
"keeping extremes at bay."  Extreme Leftist union SUD had emerged 
earlier this year as the major perpetrator of anti-government 
protests and traditional trade unions feared that it would swell its 
membership at their expense.  The President, for his part, was 
concerned that the newly formed anti-capitalist party NPA could 
become a major opposition party as a result of the June European 
parliamentary elections. 
¶6.  (SBU) This unexpected strategic alliance between the President 
and trade unions also proved useful in overcoming a deteriorating 
social climate in France, according to Soubie.  Prior to the crisis, 
Sarkozy's reform in trade union representation (now directly linked 
to results of company-level elections), together with the 
introduction of the minimum level of service in the event of a 
strike in rail/mass transit or child care had done much to harden 
the "social debate" in France. 
 
... and balancing the French Social Model with fundamental reforms 
 
¶7.  (SBU)  With the trade unions on board, the President is 
 
PARIS 00001021  002 OF 002 
 
 
confident that he can launch another round of reforms, 
While focusing on "future-oriented spending," Sarkozy also proposes 
to continue reforming France's social model, through employment 
reform and further pension reform.  The GOF intends to invest in 
youth and "senior" employment.  "I say this is better than 
subsidizing inactivity by condemning the unemployed to handouts," he 
noted.  2010 will also be a crucial year for continued pension 
reform, Soubie underscored.  "Everything will be laid out on the 
table for the GOF, trade unions and MEDEF to discuss: from 
retirement age to the length of the period of contribution to the 
French public retirement scheme," he explained.  Starting in 2010, 
the GOF will impose financial penalties on companies with between 50 
and 300 employees not employing workers over 60 years of age, and it 
has opened the debate on increasing beyond 41 the number of years 
required for a full pension.  "We will continue to tighten the 
screws" after the crisis," Soubie remarked. 
 
¶10.  (SBU) Comment:  To achieve these and other reforms, Sarkozy 
will need to strike the right balance between maintaining France's 
social model while "giving it back every chance of success" to keep 
the unions on board in spite of factory closures and rising 
unemployment.  End of Comment. 
PEKALA