France could face serious labour unrest this winter unless a dispute between the government and trade unions on public sector pay can be sorted out in the next few weeks. At meetings with union leaders and employers' organisations this week, the Prime Minister, Alain Juppe, said he was imposing a pay freeze on all public sector workers in return for maintaining staff levels.
Union leaders emerged from the meetings warning of strike action if the government did not reverse its position. While trade unions in France are weak - less than 10 per cent of the workforce belongs to a union - they are strong in the public sector.
Any labour unrest would have knock-on effects for France's domestic budget deficit and the value of the franc, at a time when Mr Juppe is trying to increase jobs and reduce the budget deficit.
On Thursday, the gloom on the labour front was relieved when unions and employers' organisations said they had reached a separate agreement on an early retirement scheme that could allow up to 200,000 people to retire prematurely,freeing 100,000 jobs for the young unemployed. It emerged yesterday, however, that the deal was not clear-cut, as implementation would be voluntary on the part of employers.
In principle, the scheme would allow those born between 1936 and 1938 to retire from October with a pension worth 65 per cent of their final salary. It now appears employers can refuse a worker's request to benefit from the scheme. The agreement had been widely praised, in an attempt by unions and the government to disguise the impending conflict over public- sector pay.
At his meetings with union leaders, Mr Juppe spelt out both the parlous state of France's public finances and his determination that everyone should do their bit to help create jobs and curb state spending. More than 20 per cent of French employees are in the public sector, including teachers, hospital workers, and post and telecommunications workers; their pay accounts for 40 per cent of public spending.
News of Mr Juppe's intention to freeze public-sector pay through 1996 spread like wildfire, and was the subject of much indignation from union leaders and employees, who cited their low average pay and the fact that the government was not curbing private-sector pay.
Government officials justified their position on three grounds: that public employees had enjoyed average rises of more than 4 per cent last year at a time when the inflation rate was less than 2 per cent; that the statutory minimum wage was raised by more than 4 per cent in July, and that jobs in the public sector were not being cut, as some, including the former economy minister, Alain Madelin, had advocated.