US embassy cable - 05PARIS5025

UNCLAS SECTION 01 OF 03 PARIS 005025 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/TPP, EUR/ERA, EUR/WE, EUR/PPD, DRL/IL AND 
INR/EUC AND EB 
COMMERCE FOR NAAS 
DEPT OF LABOR FOR ILAB 
DEPARTMENT OF COMMERCE FOR ITA 
 
STATE FOR USTR 
 
E.O. 12958:  N/A 
TAGS: ECON, ETRD, PGOV, PREL, ELAB, PINR, FR, EUN, French Business, Economic Issues 
SUBJECT: ELECTION OF NEW FRENCH BUSINESS LEADER HINTS AT 
LARGER SOCIAL AND ECONOMIC MAKEOVER 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
SUMMARY 
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1. (SBU) France's leading business association, MEDEF, on 
July 5 elected Laurence Parisot, head of major French 
pollster, IFOP, as its new president.  Parisot is a first 
for MEDEF, both in that she is the CEO of a cutting-edge 
services sector business and a woman.  MEDEF has long been 
considered a conservative organization, dominated by 
smokestack industry business concerns and patriarchal 
bosses.  As one of France's major "social partners," 
alongside labor unions and the government, MEDEF is key to 
advancing social and economic reforms in France.  Parisot's 
election comes at a time of deep transition and dislocation 
in France, with some commentators going so far as to suggest 
that a long gestating crisis -- in France's governmental 
structures, and its economic and social "models" -- may be 
coming to head with the end of Jacques Chirac's 10 years as 
president (current term ends in May 2007).  In her 
acceptance speech Parisot stressed MEDEF's commitment to 
promoting the global competitiveness of France's economy, 
and placed special emphasis on the importance of research 
and innovation.  Unabashedly pro-market and pro-business, 
Parisot also reiterated MEDEF's long-standing calls for a 
reduction in the tax, regulatory, social security burdens on 
businesses.  There is strong resistance to tampering with 
the underpinnings of France's "social model," particularly 
in government bureaucracies and labor organizations.  If she 
should be successful in catalyzing movement on these 
neuralgic issues, Parisot will have to convince an 
overcautious French political class and the public at large 
that MEDEF is acting in the wider interest of French 
society, something her predecessors have never succeeded in 
doing.  End Summary. 
 
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MEDEF: turning over a new leaf 
------------------------------ 
 
2.  (SBU) By putting at its helm a woman who established her 
reputation as an business leader as the head of a major 
polling firm, the French employers' association MEDEF 
(Movement of French Entreprises) clearly signaled its 
willingness to take a new direction.  MEDEF's 750,000 
members, comprising large as well as small-and-medium-sized 
companies, sent a message to French society at large that it 
intended to modernize.  Laurence Parisot's victory is ground- 
breaking in that it manifests the primacy of services over 
industry, of newer, smaller businesses over older, larger 
industries, and of a younger generation of salaried business 
leaders over older, "captains of industry." 
 
3.  (SBU) The election of Parisot was far from a foregone 
conclusion.  She competed against former Economy and Finance 
Minister Francis Mer and Guillaume Sarkozy, President of 
MEDEF's federation of textile industries (and brother of the 
Interior Minister and Presidential hopeful Nicolas Sarkozy). 
However, Parisot is said to have benefited from the discreet 
but active support of French President Jacques Chirac, 
retail magnate Francois Pinault of Pinault-Pintemps- 
LaRedoute, and Claude Bebear of the insurance giant AXA. 
 
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Parisot's Agenda 
---------------- 
 
4.  (SBU) In her acceptance speech, the new head of MEDEF 
spoke of the need to make people "love the market economy" - 
- a daunting challenge in a country where a range of leading 
political figures, including President Chirac and centrist 
politicians and labor leaders, regularly decry "Anglo-Saxon- 
style liberalism."  Parisot also talked of promoting 
employment by bringing greater flexibility to the French job 
market, simplifying the 600 article-strong French Labor 
Code, cutting labor costs, and developing closer ties 
between universities and businesses to prime the pump of a 
knowledge-based economy.  Parisot underlined that her 
proposals tracked with the "Lisbon Agenda" -- the EU's 
competitiveness priorities agreed to the EU heads of state 
meeting in Lisbon in 2000.  Parisot also intimated that she 
might resurrect the MEDEF's 1999 "project for "social 
renewal, which, at the time, led to a breakdown of talks 
between the then-Socialist government, trade unions and 
employers.  Winning the public's support for a business 
friendly approach to social and economic policy will be key 
to Parisot's success, given her ambitious agenda. 
 
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Difficulties ahead 
------------------ 
 
5.  (SBU)  An expert on French public opinion, Parisot takes 
over at a time of deep-rooted economic and social malaise in 
France, fuelled by unemployment at a five-year high of 10.2 
percent.  A poll jointly conducted by the economic magazine 
"L'Expansion" and the pollster CSA in October 2004 shows 
that outsourcing and relocation outside France is seen as a 
"serious phenomenon" by 88 percent of the French population 
and as a "lasting" one by 70 percent.  A third of the 
population further believes that they or someone they know 
will loose their job.  This is considerably worse than a 
decade ago, when globalization was already perceived as 
having a negative impact on employment in France.  Many 
French economists stress that the fear of relocations and 
outsourcing is "irrational" -- for example, since both 
together accounted for only for only 1 percent of job losses 
in 2004, losses more than offset by the estimated 20,000 
jobs created by foreign investment every year. 
 
6.  (SBU) Feeding the public's possibly exaggerated fears of 
outsourcing, some left-leaning political parties and labor 
organizations attempt to portray MEDEF as the vanguard of 
"neo-liberalism," and the engine of job losses and economic 
insecurity.  Many "anti-liberal" sympathizers also opposed 
the EU Constitution in the referendum on it, which took 
place last May.  The clear defeat of the proposed 
constitution understandably buoyed those who opposed it, 
possibly making them more combative in the upcoming debates 
-- MEDEF leading the charge for liberal reform -- on 
questions of economic and social policy (in particular, the 
upcoming debate on unemployment benefits and the financing 
thereof). 
 
 ---------------------------------------- 
Upcoming debate on unemployment insurance 
----------------------------------------- 
 
7.  (SBU) MEDEF's Directors for Social Affairs and for 
Employment told us on July 13 that they believed the French 
left's resistance to economic and social reform will likely 
resurface in September, with the start of negotiations on 
the future of the French unemployment insurance scheme, 
among the last of the French welfare state's "third-rail," 
sacred cows.  The financial situation of the principal 
unemployment insurance fund (UNEDIC), jointly managed by 
trade unions and employers, has worsened dramatically over 
the past few years. 
 
8.  (SBU) The fund will face a deficit of between 13 and 15 
billion Euros by the end of the year.  This is a six-fold 
increase compared to the deficit faced 3 years ago, when the 
first cutbacks in benefits and increases in contributions 
were agreed to.  At the time, two trade unions, the one-time 
Communist, (General Confederation of Labor) CGT and its off- 
shoot, the sometimes more militant, but much smaller, CGT- 
FO, refused to sign the agreement.  They objected to the 
"back-to-work assistance plan" (PARE), designed to speed up 
return to the workforce by the unemployed, through greater 
"supervision."  MEDEF will be backing similar strictures to 
cut costs this time around also; for example, MEDEF favors 
tightening requirements for entitlement to unemployment 
benefits, along with a series of measures to exert greater 
control over an unemployed person's discretion to turn down 
job offers. 
 
 
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Resistance to change may be weakening 
------------------------------------- 
9.  MEDEF hopes that public attitudes towards generous 
unemployment benefits may be changing as the character of 
France's workforce changes -- becoming more youthful as baby- 
boomers retire, with ever more frequent jobs changes, in an 
ever more services-oriented economy.  (This sea-change 
includes a significant drop in trade union membership  - now 
at an all-time low -- from over 23 percent of the workforce 
in 1978 to between 7 and 8 percent today.  Today, France's 
workforce consists of 7 million employees in the services 
sector, as opposed to 5 million in industry, 1 million in 
construction and public works, and another 5 million in 
government jobs.)  A recent poll by the CREDOC research 
center shows that an overwhelming 84 percent of the French 
population wants unemployment benefits curtailed and 
"greater guidance" exerted over the unemployed to get them 
back to work faster. 
 
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...but remains formidable nonetheless 
-------------------------------------- 
 
10. (SBU) The opposition MEDEF foresees stems from 
established, labor organizations seeking to sustain benefits 
that protect their members, and from a renewed, leftist 
populism that persists in demonizing business.  According 
MEDEF, French trade unions no longer react along predictable 
ideological lines because they are no longer "politically 
representative" bodies.  This ideological void has been 
filled by new (often distantly "Trotskyite inspired" groups, 
such as SUD, Attac and LCR,) which are attracting new 
members with their aggressive anti-globalization, anti- 
liberalism stances.  MEDEF is planning a sustained campaign 
to educate the public about such issues as unemployment 
insurance (and lay-off compensation) reform and labor code 
reform, before pressing its positions with its union and 
government "social partners."  If Parisot -- an opinion 
professional -- succeeds in swinging public opinion to 
MEDEF's outlook on these issues, she will have accomplished 
a goal, which was elusive to all her predecessors. 
STAPLETON