US embassy cable - 05PARIS1833

UNCLAS SECTION 01 OF 02 PARIS 001833 
 
SIPDIS 
 
SENSITIVE 
 
DEPT ALSO FOR EUR/WE, DRL/IL AND INR/EUC 
DEPT OF LABOR FOR ILAB 
DEPT OF COMMERCE FOR ITA 
 
E.O. 12958: N/A 
TAGS: ELAB, FR, PGOV, PINR, PREL, SOCI 
SUBJECT: RAFFARIN MOVES TO DAMPEN DISCONTENT BEFORE MAY 29 
REFERENDUM 
 
REF: PARIS 1649 
 
SUMMARY 
-------- 
1.  (SBU) Prime Minister Jean-Pierre Raffarin agreed to open 
wage negotiations with public sector unions following a 
relatively strong turnout for the general strike on March 10 
(reftel).  Raffarin also called on French corporations "to 
share the wealth" with private sector workers following a 
year of record profits.  Speaking in a national radio address 
on March 13, Raffarin did not quantify his proposals but the 
unions welcomed Raffarin's gesture as a first step toward 
wage increases.  Raffarin, however, insisted that he intended 
to move forward with two controversial proposals: increasing 
the work week beyond the current 35 hours, and reform of the 
national education system.  With the referendum on the EU 
Constitution looming May 29, the government hopes that 
proposals to open wage negotiations with public sector 
workers, along with other concessions to private sector 
workers, should put the government in a stronger position 
going into the final stretch of the campaign for the EU 
Constitution.  However, concessions might have the opposite 
effect, emboldening the unions to continue their 
demonstrations and strikes.  Those angered by the reforms 
could use the EU referendum to cast a "sanction vote" against 
the government.  END SUMMARY. 
 
OPENING TALKS WITH PUBLIC SECTOR WORKERS 
---------------------------------------- 
2. (U) Three days after the relatively strong turnout of 
public and private sector workers for the general strike on 
March 10 (reftel), Prime Minister Jean-Pierre Raffarin 
announced the reopening of wage negotiations for public 
sector workers in a radio address March 13.  The talks will 
begin March 23, and will affect public sector salaries for 
2005 and 2006.  The government, which had previously 
announced a minimal increase of 1 percent for public sector 
salaries in 2005, has limited room to maneuver.  France, in 
accordance with Stability Pact guidelines, is committed to a 
public deficit of 2.9 percent at the end of the year, 
compared with 3.7 percent in 2004.  In order to achieve this, 
government forecasts for 2005 initially assumed an economic 
growth rate of 2.5 percent and cuts to state expenditures. 
At a press conference March 16, Finance Minister Thierry 
Breton admitted that France's actual growth rate for 2005 
would likely be closer to 2 percent.  If PM Raffarin bows to 
union demands for another 1 percent increase to public sector 
salaries, France's 2005 government budget deficit will again 
likely breech EU Stability Pact guidelines. 
 
 
CALLING ON PRIVATE SECTOR TO "SHARE THE WEALTH" 
--------------------------------------------- -- 
3. (U) Raffarin also called on French corporations to "share 
the wealth" following a year of record profits and a strong 
performance by the stock market.  The head of France's 
employer's association, MEDEF, immediately dismissed the 
proposal, saying businesses would do what they saw fit given 
their competitiveness and other market conditions.  Raffarin 
cannot in any way force private companies to share profits 
with employees; he is proposing a plan to enhance current 
profit sharing legislation, which he will unveil in an 
address on March 23. 
 
STAYING THE COURSE ON OTHER REFORMS 
----------------------------------- 
4. (U) In the same radio address, Raffarin reiterated that he 
would continue to press for passage of two controversial 
reform proposals: the first would allow workers to "increase 
their purchasing power" by working more than 35 hours per 
week, if they so desired; the second is a reform of the 
politically sensitive national education system.  Work-week 
and education reforms have been the catalysts for the three 
waves of strikes that have hit France over the past three 
months.  Both reforms are expected to be passed by the 
National Assembly and Senate by the end of March. 
 
COMMENT 
------- 
5. (SBU) Raffarin, along with key supporters in the 
government such as Finance Minister Thierry Breton, have kept 
hammering home their conviction that the consequences of 
rejecting reform would be crippling.  Moreover, the 
apparently shrinking rate of economic growth -- announced by 
Breton on March 16 -- makes the economic case for 
growth-spurring reform stronger.  The government expects the 
demonstrations and polemics will recede once the proposed 
work week and education reforms are passed by parliament. 
Raffarin believes his proposals to open wage negotiations 
with public sector workers, and to encourage private sector 
profit-sharing programs, should put the government in a 
stronger position going into the final stretch of the 
campaign for the EU Constitution.  However, Raffarin's 
concessions could have the opposite effect, emboldening the 
unions to continue their demonstrations and strikes.  Should 
the reform proposals bog down in parliament and/or should the 
demonstrations against them continue, then the unsettled 
climate of social tensions could impel many who would 
otherwise vote for the proposed Constitution (and with the 
government) to show their dissatisfaction by voting 'no.' 
 
6. COMMENT CONT'D: (SBU) According to an IPSOS poll published 
on the same day as the general strike (March 10), 60 percent 
of French voters planned to vote in favor of the EU 
Constitution.  The IPSOS also showed that over a third of 
likely voters remain undecided.  However, a CSA poll 
published on March 18 -- which took into account voter 
sentiments following the general strike -- projected that 
French voters would reject the treaty 51 to 49 percent.  The 
CSA poll seems to have registered the decidedly negative 
impact the general strike has had on the public's mood.  In 
addition to their worries about persisting social discontent, 
pro-EU politicians are worried that some unforeseen issue -- 
particularly in the key, final two weeks of the campaign -- 
could tip the scales in favor of the 'no' camp.  Another 
scandal, like the one which recently toppled former Finance 
Minister Herve Gaymard, could trigger anti-government 
'rejectionist' votes.  Many point to the groundswell of 
anti-Europe feeling that has accompanied objections to the 
Bolkenstein directive on services as revealing the strength 
of latent mistrust among the French of an economically 
'liberal' Europe.  END COMMENT. 
Leach