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PSA Peugeot Citroën’s announcement of the closure of Aulnay comes at a critical moment for France’s Socialist government as it is under pressure from business leaders alarmed by the slide in the country’s industrial competitiveness to take shock action on two fronts: labour costs and the employment protection regime.
Hourly labour costs in the French manufacturing industry, which were 10 per cent less than Germany’s in 2000, now stand at €35.70, ahead of Germany on €34.90 and well above the eurozone average of €29 and the UK on €21, according to Eurostat figures.
This week, Jean-Marc Ayrault, prime minister, signalled clearly for the first time that the government was willing to shift some of the high charges on employment that help fund France’s huge social welfare programmes on to direct taxes – despite having scrapped a move by the previous government to do so by raising value added tax.
But this is not likely to happen at least until next year and will face a rearguard action by some trade unions. Likewise, Mr Ayrault has opened the door to discussions on reforming employment terms and wage-setting. But he has shut down an initiative launched by former President Nicolas Sarkozy to allow individual companies facing difficulties to negotiate German-style local agreements on pay and working hours.
These mixed signals have been reflected in the government’s reaction to the crisis at PSA. Prompted also by an appeal from Renault, it has promised a package of state support for the car industry. But it has played down expectations of direct financial support or a resumption of scrappage schemes such as those introduced in 2009.
Arnaud Montebourg, the left-leaning industry minister, said last month it would be “extremely difficult to go against the negative wind” of market conditions. Michel Sapin, labour minister, said instead the plan would aim to “help (companies) face the future” in terms of “research, development and innovation”.
Gérard Morin, French automobile specialist at PwC in Paris, said any state aid should be focused on gearing the industry for the future through research and development. But President François Hollande’s government is a long way from countenancing the kind of radical restructuring that the US auto industry went through.
“Today in France you don’t have the flexibility of the Americans, where they shut down plants and went through (bankruptcy) and now they have an industry that is doing well and creating jobs. France doesn’t have that culture,” said Mr Morin.