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French President Emmanuel Macron addresses a speech during the annual gathering of French Ambassadors at the Elysee Palace in Paris, France, August 29, 2017. REUTERS/Yoan Valat/Pool


By Ingrid Melander and Michel Rose

PARIS (Reuters) - The French government unveils on Thursday a highly anticipated labour reform plan seen at home and abroad as a crucial test of new President Emmanuel Macron's reform mettle.

Aimed at making it easier to hire and fire workers in order to fight stubbornly high unemployment, it will cap dismissal awards, allow workplace referendums and extend the list of issues bosses can negotiate directly with their staff.

The first major reform since Macron was elected in May on a pledge to shake up a sluggish economy, the plan is set to be followed by further difficult bills in the next months, including on pensions, unemployment benefits and public finances.

Governments of all political stripes have for decades tried to overhaul complex labour rules in France, where the labour code now runs more than 3,000 pages. But they have eventually watered down plans in the face of street protests.

"This is the mother of all reforms; we're well aware of that," Finance Minister Bruno Le Maire told France's main employers' federation on Wednesday.

Opinion polls paint a mixed picture of voters' views.

While 60 percent are worried by the upcoming reform overall, when looking at specific measures, some 61 percent agree that bosses should be able to put deals to a referendum in their firm. Just over 50 percent back making short-term work contract rules more flexible, according to an Elabe poll.

However one key measure, capping compensations for unfair dismissal, is deeply unpopular. Sixty-two percent of those surveyed are opposed to it.

The labour reform, which was announced by Macron during his election campaign, will be unveiled at a time when the 39-year-old president has suffered a steep drop in popularity ratings.

Early policy announcements including an overhaul of the wealth tax and cuts to housing assistance have left a swathe of voters feeling Macron's policies favour the rich, pollsters say.

But officials said the government feels entitled to push ahead with the reform even if protests arise because the plan was in his presidential manifesto.


"We didn't take anybody by surprise," a source close to Macron told Reuters, adding this was different from Macron's predecessor, the Socialist Francois Hollande, who made an unexpected pro-business switch two years into his mandate.

In any case, lawmakers have already given their okay to the government to adopt the measures by decree without submitting them to parliament.

In an interview with weekly magazine Le Point, Macron insisted he would stick to his labour reform plan and would "profoundly transform the economy, society and the political landscape," saying opposition to this came from "old parties, old politicians, and their allies."

France's employers' federation said the labour reform would make or break the Macron presidency.

While the country's second-largest union, the CGT, has announced nation-wide protests on Sept. 12, the third-largest union, Force Ouvriere, unexpectedly said on Wednesday that it liked part of the reform and would not take to the streets that day, in a relief to the government.

The far-left France Unbowed party of Jean-Luc Melenchon has planned another day of protests on Sept. 23.

The reform is seen by French officials as essential to reassure their euro zone partners – and chiefly Germany – that Paris is serious about reviving its economy, which they hope could then help convince Berlin to agree to French plans for a euro zone budget.

German Foreign Minister Sigmar Gabriel said on Wednesday during a visit to Paris that he was "impressed" by Macron's labour reform plan. "I am certain this will help you get stringer economically and socially," he told reporters.

(Additional reporting by Leigh Thomas, Caroline Pailliez; writing by Ingrid Melander; Editing by Cynthia Osterman)

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