Macron, Air France and the French Economy

Reuters photo

By

Tom Arms

The French economy is heavily regulated. It is directed by a policy known as dirigisme. This is an economic system in which the state exerts a strong influence over investment and assumes a directing role in a basically capitalist economy.

Dirigisme was totally dominant from 1944 to 1983 and partially so ever since.

Emmanuel Macron is not so keen on dirigisme. It helped to rebuild post-war France, but it has also left a legacy of complex laws regulating employment, unaffordable pensions and subsidised industries—especially in transport. It has also tipped labour relations heavily in favour of French trade unions as government subsidies and regulations create French jobs.

There are 3,000 separate measures in the Code deTravail which regulates French labour relations. They favour the workers at the expense of management and many economists, including investment banker turned finance minister turned president Macron, say they contribute to France’s staggering 10 percent unemployment rate.

Macron plans to reform the labour laws so that the power shifts from the unions and workers into the hands of the employers. Air France-KLM is a test case.

There have been past test cases. Mitterrand, Giscard d’Estaing, Chirac, Sarkozy and Hollande have all tried to drive through economic reforms. Each time they have crashed into the brick wall of trade union opposition.

The French government is the single largest shareholder in the Franco-Dutch flag carrier. The shareholding is 14 percent which is smaller than what it was but if the company wants more money in a rights issue than Macron’s government will be asked to cough up.

Air France-KLM is a financial basket case. It has been losing money for several years and for the past seven the staff have endured a pay freeze. Not surprisingly, this has upset the workers, which is why they are demanding an immediate five percent pay increase to make up for the previous seven year freeze.

To back up their claim, pilots, ground crew and cabin crew have since the start of the year staged a series of strikes which have so far cost the airline $357 million. To make matters worse, the company’s share price has plunged 50 percent since January.

CEO Jean-Marc Janaillac countered with the offer of a two percent increase now and another five percent spread over the next three years. He said historic losses plus the cost of this year’s strikes makes the unions’ demands unaffordable and unsustainable. The union rejected M. Janaillac’s offer and he promptly resigned in a fit of exasperated and frustrated pique.

This week Air France-KLM holds a crunch board meeting and their AGM. There is no money in the kitty to pay the union demands. Macron is refusing to stump up more cash. The drop in share price has reduced the company’s borrowing capacity. The unions are standing firm and will probably continue to do so until their members are out of a job and 84 million passengers are forced to find an alternative airline.

All this could be prevented if the President of France abandons his tough love economic policy, but to do so would only delay the inevitable – again.

Tom Arms

I am a journalist, entrepreneur and historian with extensive experience in print, web and broadcast journalism. I started as a diplomatic correspondent, wrote several books (The Falklands Crisis, World Elections On File and the Encyclopedia of the Cold War), and then in 1987 started my own business (Future Events News Service, www.fensinformation.com) which over 25 years established itself as the world and UK media’s diary. Our strapline was: “We set the world’s news agenda.” I sold FENS in December 2012 but retained the exclusive broadcast rights to all of FENS data. To exploit these rights I set up LookAhead TV which produces unique programmes which “Broadcasts Tomorrow Today” so that viewers can “Plan to Participate.” LookAhead has appeared regularly on Vox Africa, Radio Tatras International, The Conversation and Voice of Africa Radio.

In addition to being a syndicated broadcaster and columnist on global affairs, Tom is also available for speaking engagements and can be contacted on Twitter, Linkedin and email: [email protected].