New Way of Foiling Pink Slips Puts France in Historic Bind

Ronal Reagan had his air traffic controllers' strike. Margaret Thatcher had her coal miners' strike. The defining moment in French leader Jacques Chirac's presidency could be his government's face-off with the 3,300 employees of the Credit Foncier bank.

If the French government is to meet European targets for monetary union by the end of 1997, it needs to find new ways to cut government spending. Credit Foncier was supposed to be an easy target. The recently state-owned bank is nearly bankrupt, and taxpayers seemed unlikely to back a $1 billion bailout to save it.

Moreover, Credit Foncier employees were supposed to be more docile than the burly railroad workers and armed truckers who faced down the government in dramatic December 1995 and '96 protests. Foncier staff wear suits and ties; they sit behind computer terminals amid potted palms. To other workers, they are the nantis, or privileged ones. They were supposed to go quietly.

The government guessed wrong. On Jan. 17, Credit Foncier employees took bank governor Jerm Meyssonnier and members of his executive board hostage after a meeting to update employees on government plans to dissolve the bank.

For months, employees had been demanding access to the Finance Ministry documents used to justify the bank's demise. Unions wanted more dialogue with ministry officials and time to work out their own survival plan. By "retaining" their governor (neither Mr. Meyssonnier nor employees used the term favored by the news media, "hostage"), unions put their plight into the headlines and back on the agendas of top government officials.

In response, French Prime Minister Alain Jupp appointed a mediator, and five days after their "soft" kidnapping (another adjective favored by both sides), unions released the governor and board members. Some employees said they feared that riot police would be called in if the detention lasted any longer than five days.

Government mediator Philippe Rouvillois and the six-union coalition that has been representing employees are set to meet again today, but employees say that workers will continue to occupy Credit Foncier headquarters until at least Feb. 5.

The main concern for the government is to avoid letting Credit Foncier become a rallying point for other workers affected by government restructuring plans. On Jan 28, 46 unions representing 14 semi-public banks rallied outside Credit Foncier headquarters in support of workers. Unions argued that Credit Foncier had become the symbol of resistance to all plans for restructuring the banking sector, which could affect some 80,000 jobs.

Last week, white collar union leader Marc Vlbenoit warned that the Credit Foncier conflict could signal a more general anger by French office workers, who have seen their level of unemployment triple since 1992. According to the latest government statistics, unemployment across France just topped 13 percent and is projected to go higher. Many workers at Credit Foncier said they did not expect they could find another job, a view shared by French voters who have put employment as their top concern for the last 20 years.

"Ten years ago, it was hard to find another job at 50; five years ago, it was 45; and now it's 40," says Agnes, who asked that her full name not be used. "If I lose this job, I will not find another. There are too many qualified young people out of work and working for a lot less than what I make here."

Credit Foncier, created in 1852 by Emperor Napoleon III, was the city of Paris's banker during the great building boom of the 1860s that transformed the French capital into a city of impressive buildings and other monumental public works. After World War II, the bank spearheaded a public housing boom. Until 1995, it was the only bank in France allowed to distribute government-subsidized housing loans to low-income buyers.

The French government blames the bank's current crisis on bad real estate loans in the 1980s, when the Socialist Party controlled key ministries. Last year, the government wrote off $2.5 billion in bad loans at the bank and now claims that another public bailout is impossible.

"I am convinced that we can't take this course, given the condition of our own public finances and our European engagements," Finance Minister Jean Arthuis told the National Assembly last month.

Last July, Mr. Arthuis announced a plan to dismantle the bank. Key bank assets along with some 1,500 of its workers would transfer to a rival bank, Credit Immobilier de France.

Unions blame the crisis on bad management by both Socialist and conservative politicians, and especially by elite Ministry of Finance managers, including Jean-Claude Trichet, the current governor of the Bank of France, as well as Finance Minister Arthuis, who saw the crisis coming and failed to issue a warning.

They also blame the current government for suppressing the housing loans that had been the mainstay of the bank without warning or compensation.