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President Nicolas Sarkozy on Wednesday opened up another front in his campaign to reform France when he offered the country’s 5m civil servants higher pay and better working conditions if they agreed to more flexible contracts and better performance.
A day after he announced an ambitious reform of the welfare state, Mr Sarkozy turned his attention to the public sector, saying he wanted to give it “suppleness and fresh blood”.
The president hopes that opening up a wide-ranging overhaul of the labour market and a shake-up of the civil service will answer his critics who had begun to suspect that he was more talk than action.
His central proposal on Thursday was for an easing of tight job delineations, many enshrined in law 50 years ago, which have left the public sector inefficient and overstaffed. He confirmed his intention of cutting 100,000 civil service jobs over five years by not replacing one-in-two of those officials reaching retirement.
But Mr Sarkozy eschewed any talk of “austerity measures”, promising instead full consultation with unions on what opinion polls show is one of his least popular reform proposals.
The trade unions were already reeling at the breadth of the changes to the welfare state and the speed with which Mr Sarkozy wants to complete them. But the president has now promised them a pivotal role in the negotiations, as long as they do not simply drag their feet.
Economists, who had begun to doubt whether any government would get to grips with labour and product market liberalisation, were reassured.
“At last they are starting to deal with the real world,” said Jacques Delpla, a banker and former Sarkozy adviser.
Mr Sarkozy moved swiftly before the summer holidays to enact his campaign promises, including a €15bn ($21bn, £10bn) package of tax cuts. But doubts began to set in after a number of key reforms were watered down.
Delaying the elimination of France’s public deficits suggested the government was not serious about getting public finances in order.
Analysts also questioned the efficacy of a tax cuts to boost demand, when the problem was not a lack of consumer demand but a lack of supply from over-regulated labour and product markets.
“People could see the argument that tax cuts could help to buy approval for structural reforms,” said Philippe D’Arvisenet, chief economist at BNP Paribas. “But they weren’t convinced the government was actually going to do them.”
Mr Sarkozy appears to have taken advocates of reform by surprise with his labour market proposals. He has accelerated the merger of the unemployment and benefits offices, proposed tougher conditions on the unemployed to seek work and is seeking longer-term changes to labour contracts.
Francis Kramarz, a labour economist, said these changes were a carefully phased and essential first step towards a wider overhaul of regulations that were hindering growth of the service and retail sectors.
This phase of changes – being prepared by an independent commission – is bound to lead to a shake out of jobs in overly protected sectors. To manage the transition, France needed structures to help people shift from job to job.
“It is about moving from an economy that is protecting jobs to an economy that is protecting people”, Prof Kramarz said.
However, critics still question how far-reaching the changes will be.
Hervé Mariton, an outspoken deputy from Mr Sarkozy’s centre-right UMP, said the government was in danger of giving too much ground to the unions. “There is a danger we pay more attention to the packaging than the content,” he said.