French employer group urges 'shock therapy' for economy

[September 24, 2014] PARIS (Reuters) - France should scrap its 35-hour work week, raise the legal retirement age and lower the minimum wage if it hopes to bring down chronically high unemployment and stimulate growth, the country's main employer group said on Wednesday.

Medef said that if implemented, its proposals would help Europe's second-largest economy create 1 million jobs over the next five years. France's unemployment rate is stuck above 10 percent, with nearly 3.5 million job seekers registered in July.

Unions reacted with outrage earlier this month when some of the proposals were leaked in local media, prompting Socialist Prime Minister Manuel Valls to urge all parties to steer clear of "provocations".

But Medef chief Pierre Gattaz said he was ready to accept controversy to spark a proper discussion about what is holding back the French economy.

"We accept that risk because ... it's our future together that is at risk," he wrote in an introduction to the pamphlet, noting some proposals "will certainly seem aggressive or exaggerated to some people".

President Francois Hollande has introduced some measures aimed at stimulate hiring since his May 2012 election, including offering 40 billion euros of payroll tax cuts to firms, a modest easing of hire-and-fire rules and job training reforms.

But such moves have yet to yield firm results. Unemployment has continued to edge up despite reforms and thousands of subsidized jobs, while growth stagnated in the second quarter and business activity slowed in September.

August figures for job seeker totals are due at midnight EDT.

France's lackluster economic recovery, which has lagged euro zone peers and meant France has missed targets to reduce its public deficit, has raised pressure on a deeply unpopular Hollande to reform harder and faster.

German Chancellor Angela encouraged Valls to push ahead with reforms during his visit to Berlin on Monday and ECB chief Mario Draghi said earlier "the risk of doing too little is higher than the risk of doing too much.

Hollande's government is set to introduce a law loosening rules that limit competition in regulated professional sectors and has flagged a move easing rules on thresholds for worker representation that companies say put a brake on hiring.

Yet Gattaz pressed him to go further and end the 35-hour work week introduced by a Socialist government in 2000, allow firms to go around the 1,445-euro ($1,856) monthly minimum wage, scrap two of 11 bank holidays and authorize exploration for shale gas, currently banned on environmental grounds.

He also called for a cap on taxes on companies, further loosening of labor rules, and overhauling a generous jobless benefit system so that more job-seekers accept employment.

"Having a legal work duration of 35 hours imposed on every company no longer makes sense in the France of today," Gattaz told BFM TV. "We propose that each company negotiate its own work duration, according to its business needs."

The government is unlikely to implement most of Gattaz's ideas as Valls told parliament last week that neither the 35-hour work week nor the minimum wage would be changed.

(1 US dollar = 0.7787 euro)

(Reporting By Emmanuel Jarry and Nicholas Vinocur; Writing by Nicholas Vinocur)

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