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President Nicolas Sarkozy, battling against rising unemployment as he faces re-election in April, on Wednesday announced a €430m package of short-term measures to support job creation and promised a bigger package of reforms at the end of the month.

At a much-heralded meeting with trade unions and employers’ organisations – dubbed a “summit of the crisis” by the Elysée palace – Mr Sarkozy said the need for action was urgent as the economy had suffered an “important slowdown” in the fourth quarter of 2011.

“The current economic situation in France and in Europe is very perilous. The situation is urgent,” he told the meeting.

However, the unions refused to support more radical moves planned by Mr Sarkozy to cut France’s high labour costs – seen as a key element in making French production more competitive – by raising the level of value added or other taxes and reducing the high level of social charges on employment.

Mr Sarkozy said he would make detailed proposals on this at the end of the month in a further package of measures intended to show that he is prepared to undertake bold reforms right up to the end of his term of office.

He told the meeting unit labour costs in France had jumped 20 per cent in the first decade of the century, compared to just 7 per cent in neighbouring Germany. At the same time, France’s export share in the European Union slid to 12.6 per cent from 15.8 per cent.

“We are in a new world in 2012 which forces us to face up to new ideas,” he said.

Medef, the business federation, has strongly urged the president to go ahead with the move to cut labour costs, saying it would benefit both enterprises and wage earners. They share much of the cost of France’s big welfare state via charges on employment.

The package planned for the end of the month is also set to include proposals for extending German-style provisions for short-time working, giving companies more flexibility to negotiate flexible pay and working hours during a downturn and new partnerships between the state and the banks to fund industry. It is also expected to include proposals for the introduction of a financial transaction tax.

The government said it would redeploy the €430m from within existing allocations to avoid increasing the budget deficit. More than €140m would be spent on supporting the extension of part-time working at companies facing a slowdown and €100m would back the suspension for six months of charges on the employment of workers under the age of 26 by small companies.

A further €150m would be spent on training for long-term unemployed and almost €40m would fund the hiring of 1,000 staff for job centres. Unemployment in France is nudging up towards 10 per cent.

Copyright The Financial Times Limited 2017. All rights reserved.

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