July 12, 2007 1:10 pm

Lawmakers back French overtime reform

Nicolas Sarkozy scored an early victory for his bold reform programme on Thursday after French legislators approved a measure that would make overtime pay tax-free.

The measure, approved early Thursday morning by the National Assembly, or lower house of parliament, after seven hours of heated debate, is part of a sweeping package of bills proposed by Mr Sarkozy’s centre-right government to stimulate growth and employment.

It comes ahead of the French president’s speech on the reform of the country’s political institution.

True to the mantra “work more to earn more” championed by Mr Sarkozy during his presidential campaign, the overtime bill aims to encourage people to work beyond the 35-hour work week by eliminating income tax or social charges on overtime hours.

Other fiscal measures that will be debated this week include lower inheritance taxes, tax credit for mortgage loans and a new rule limiting a household’s total tax payments from 60 per cent to 50 per cent.

The high cost of the package, estimated by finance minister Christine Lagarde to be to the tune of €13.6bn, has raised eyebrows in the European Union and within Mr Sarkozy’s own UMP party.

The overtime bill alone is expected to result in €6bn in lost revenue for the state coffers.

However, Mr Sarkozy has said he expected a surge in growth would help balance the plan’s costs. Ms Lagarde said the package would add 0.5 percentage points to French GDP growth.

Members of the Socialist party have vehemently opposed the bill, describing it as “tax breaks for the rich”.

Henri Nayrou, a Socialist deputy from Ariège, south-east France, said the overtime measure would only encourage company bosses to make their their workers work longer hours rather than take on new staff.

“[The bill] would allow a small number of people to work more at the expense of the unemployed,” he said during the parliamentary debate.

As part of a concerted effort to water down the bill’s 11 articles, some 500 amendments have been proposed by opposing deputies.

One hundred amendments were tacked on to the overtime measure alone, although only 41 were adopted.

Even so, members of the socialist party concede that the amendments have done little to change the nature of the bill.

The National Assembly is expected to continue debating the bill through the end of the week before sending it the Senate next week.

Experts say the bill is almost certain to pass, now that the UMP holds commanding majority in the lower house following legislative elections last month.

Meanwhile, the Socialist party is struggling to find its footing after Mr Sarkozy cherry-picked two of its most senior members this week.

On Tuesday, former finance minister Dominique Strauss-Kahn accepted Mr Sarkozy’s nomination to become Europe’s candidate to head the International Monetary Fund.

Then Wednesday, Jack Lang, one of France’s most popular politicians, quit the Socialist Party leadership, saying he no longer “identify” with the “party leadership methods”. Mr Lang has been contacted by Mr Sarkozy to join the commission to examine constitutional reform. It is not clear as of last night though whether he would accept the position.

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