French minister urges big companies to opt out of costly layoffs plan

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Muriel Pénicaud, the French labour minister, has personally called the bosses of big French companies to persuade some of them not to take advantage of the country’s already very costly “temporary unemployment” scheme designed to limit economic damage from the coronavirus crisis. “It’s about a sense of responsibility, civic behaviour for the collective good,” she told the FT in a telephone interview. She had called “a dozen of so of the big bosses” from the CAC 40 listed companies and others and told them to “re-examine their plans”. As a result “they modified their demands”, she said.France’s temporary unemployment scheme, under which the state pays all or most of the salaries of laid-off workers on behalf of their employers to stave off bankruptcies and protect jobs, is set to be one of the most expensive elements of the government’s €100bn economic recovery plan. Ms Pénicaud said it already involved 700,000 businesses and 8m employees, about 40 per cent of private sector workers, who are unable to work because of the month-old lockdown on movement to stop the spread of the disease. It was now set to cost about €24bn, three times the initial estimate. The government currently expects its public sector deficit to rise to 7.6 per cent of gross domestic product this year from 3.1 per cent in 2019. “It’s a social and economic investment,” she said, “an investment we decided to do without hesitation.” The purpose was to avoid “the massive waves of redundancies that one can see right now in the US” and to protect skills, “because without those skills, companies won’t restart tomorrow without them”.Ministers are nevertheless eager to keep as much of the economy running as possible during the lockdown and to limit the cost of the recovery plan. Ms Pénicaud, who joined President Emmanuel Macron’s government in 2017 having previously been human resources director at Danone, declined to name the chief executives she had called, but several companies have already announced they have no plans to take government money to pay employees who cannot work. Earlier this month, LVMH and Kering, the world’s biggest luxury goods groups, initially told employees they would be placed on the assistance scheme but later backtracked after smaller rivals Hermès and Chanel pledged to cope without state support in a spirit of “national solidarity”.

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Ms Pénicaud said other big companies that were not using the system or were paying the costs themselves included Total, L’Oréal and Schneider Electric. “It’s above all a system for small and medium-sized companies,” she said. Asked about telecoms groups, some of which have been criticised for using the scheme even as business prospers under the lockdown because millions are teleworking from home, she said: “Typically in telecoms, the part we accept is the shops, which we asked them to close and they have to close.”Ms Pénicaud said the priority had been to get the scheme launched rather than worry about cheating, with the motto being “trust first, check afterwards”. She said: “If we had had to check 688,000 applications in advance, we would never have finished . . . crisis of such gravity, you have to choose your fight. We mustn’t lose sight of priorities and ours is to save the economic fabric of the country.” France and other European economies were scarred by the long-term damage, including unemployment, that followed the 2008-9 financial crisis and took note of Germany’s successful use of its Kurzarbeit scheme at the time.

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According to Ms Pénicaud, 20 of the EU’s 27 members have adopted such schemes during the coronavirus pandemic. “They are not all as protective as us, but what’s interesting to see is that the UK, which didn’t have it, announced a few weeks ago that they would put a pretty massive one in place also . . . If you have waves of millions and millions of unemployed it crashes the economy.” France is now pushing to restart factories and building sites where work has stopped or slowed during the pandemic, particularly in the construction sector, where employers have been as reluctant as workers to reopen sites for fear of being held responsible for coronavirus infections owing to health and safety lapses given the shortage of protective equipment such as masks. Even with the massive rollout of the generous “partial unemployment” scheme, it is likely that the number of jobless in France will start to rise again after years of decline. At the end of last year, unemployment fell to 8.1 per cent of the workforce, the lowest level for 11 years. “For the moment [the rise in full unemployment] is very limited, which shows that the system of partial unemployment is working,” said Ms Pénicaud. “We will have avoided a lot of businesses bankruptcies and failures. But there will be some nevertheless.” Despite a short-term surge in demand for workers on farms and in transport as a result of the disruption across Europe, “the supply of jobs will not be as strong”.

 

Source: https://www.ft.com/content/59a80d4b-9730-4ae2-a5be-d3566e825848

 

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