French showdown over job benefits

For the second time in a month, a national strike forced French commuters to walk, bicycle, carpool or simply stay at home as public-transit workers Wednesday protested a government plan to roll back pension benefits.

Even if the strike ends soon, this is not likely to be the last showdown between President Nicolas Sarkozy and French unions. Mr. Sarkozy says France must embrace the leaner, globally competitive economic model adopted by other European nations such as Britain and Germany. The formula: more flexibility means more prosperity to fund social benefits. After years of resisting such reforms, France now lags behind much of Europe. After two decades of unemployment rates hovering at 10 percent, the majority of French voters agree with Sarkozy's goals.

Both sides understand that this could be a turning point.

"To renounce this reform would be a signal that no other reforms are possible," Sarkozy aide Henri Guaino told LCI Television, a French channel.

Juan Aliart, a Paris transit union leader says: "This is no longer just a strike. It's a resistance movement."

Within hours of the shutdown, the leaders of the biggest public-sector unions said they were willing to sit down and talk. Sarkozy welcomed the offer. But with a raft of other public-sector employees set to strike next week, there is little prospect that life here will return to normal anytime soon.

Several of the transit worker unions have stated that their strike would be open-ended. Other civil servants, from postal workers to court officials, said they would strike starting Nov. 20 to warn the government away from anticipated staff cuts. And students have been on strike for more than a week at about one-third of the country's 87 public universities.

Sarkozy says he will stand up to strikers. But the multiplying work stoppages will be the first test of his mettle.

When he was elected six months ago, he promised a "rupture" with the past to create jobs and stimulate growth, saying France has hesitated too long to embrace the economic reforms adopted by other European nations such as Britain and Germany.

His conservative party holds a commanding majority in the parliament, and opinion polls suggest the French also want change, at least in theory. Over the summer, the president easily won support for eliminating taxes on overtime to encourage the French to work beyond the 35-hour work week. He pushed through a law-and-order package and, last month, a tough new immigration law.

But with his attack on the pension privileges of some public workers, Sarkozy has set off the biggest opposition yet in his nascent presidency.

The public-sector unions, which depend on government subsidies rather than membership dues for their operation, have described the reform as the beginning of a sustained assault on job security and benefits.

"They are not acting in bad faith," says Philippe Manière, director of the Institut Montaigne, a Paris think tank. "Many people chose the public sector because they knew they could take early retirement. It was a fundamental part of the deal. Now they feel betrayed."

The catalyst for the transportation strike was Mr. Sarkozy's plan to eliminate the costly retirement packages enjoyed by railway and public transit workers, Bank of France officials, National Opera employees, notary clerks, and 125 other supposedly onerous occupations.

In some cases, the perks were established at a time when the jobs were considered hazardous, such as shoveling coal on steam-engine trains or working in mines. Others are based on obscure political deals that date back a century or more.

The beneficiaries – about 500,000 people or 10 percent of the government workforce – can retire with full pensions as early as the age of 50. Their pensions are based on their last yearly salary, while the pensions of other public and private sector workers are based on an average of the last 25 years.

Taxpayers now subsidize those plans at a cost of 7 billion euros a year, the lion's share of the country's total pension deficit.

Sarkozy has called the situation "disgraceful," and polls suggest that most French people agree with him. Even the opposition Socialist Party has been unwilling to go to the barricades to defend the perks. Its leaders accused Sarkozy of dictating rather than negotiating changes.

But union leaders seemed determined to make a show of strength over the special pension plans in anticipation of a new round of attacks on public-sector benefits. Their opposition is seen by many outsiders as proof that the French are ready to fight any reform, even when it might help the country balance its budget or reduce its historically high unemployment.

"France is a classic insider-outsider story," says Simon Tilford, an analyst at the Center for European Reform in London. "It's great if you're in a job. You work modest hours, you have a great pension and entitlements, you have all-encompassing employment rights."

But the people outside, without lifetime sinecures in the public service or long-term contracts, bear the costs of maintaining those privileges, he adds. "The people defending the status quo claim to be doing so in the name of social justice," says Mr. Tilford, "and that's ridiculous."

France has been at this juncture before. Over the past 20 years, the French have watched neighboring countries like Germany and Italy take belt-tightening measures that helped turn their economies around. France's economy, in contrast, has stagnated and its public debt has ballooned.

But the ambitious economic reforms of successive French governments collapsed in the face of public protests. In 1995, conservative Prime Minister Alain Juppé tried to cut welfare payments, increase healthcare premiums and raise the legal retirement age for public-sector workers. The country was paralyzed by 10 weeks of strikes. Mr. Juppé abandoned the project and later saw his government fall.

Last year, another conservative prime minister, Dominique de Villepin, attempted to create a flexible job contract for young people, who have a particularly hard time entering the labor market in France. Student and trade union protests forced him to back down, too.

Governments in Italy, Britain, Germany and elsewhere also faced labor unrest when they made painful cuts in worker benefits. What makes the task more difficult for French political leaders, according to Mr. Manière, is that public support for striking workers generally increases over time. "The French adore resistance to the powers that be," he says.

While France lags behind much of Europe in deregulating its economy and reducing the size of government, it was among the first to venture into pension reform. "France has cut benefits substantially over the years, but it has done so in a less spectacular way than other countries like Italy and Germany," says Monika Queisser, a pension specialist at the Organization for Economic Cooperation and Development in Paris.