FRANCE - BUSINESS UPDATE

UNCLAS PARIS 000686

SIPDIS

SENSITIVE

STATE FOR EB/TPP, EUR/ERA, EUR/WE, EUR/PPD, EB
STATE PASS USTR
COMMERCE FOR ITA

E.O. 12958: N/A
TAGS: ECON EINV ETRD ELAB PREL EUN FR
SUBJECT: FRANCE - BUSINESS UPDATE


NOT FOR INTERNET DISTRIBUTION


1. (U) This message contains a series of updates on French
trade and business news.

France's foreign trade deficit widened in 2005
-------------- -


2. (U) France's trade deficit widened last November, leading
many experts to conclude that France is heading for a record
shortfall in 2005. They predict that the deficit could be
close to 25 billion Euros for the whole of 2005, an all-time
record in the history of the French economy. This
deterioration in the French trade balance is one of the
worst in the Eurozone. In the 25-member EU, only Britain
and Spain have bigger trade deficits. French analysts
diagnosed that the rising cost of oil imports alone did not
explain the growing deficit. Rather, they blamed France's
weak exports, which they believe are too dependent on
Eurozone markets and not sufficiently focused on more
competitive sectors.


Re-negotiating the 35-hour week
--------------


3. (U) A growing number of French subsidiaries of foreign
companies are asking staff to work longer for no additional
pay. In doing so, they are abiding by a relatively new
March 2005 law allowing employers to negotiate deals with
staff to increase working time by 220 hours a year in return
for better pay. The first company to renegotiate working
hours with its employees early last year was Bosch's French
subsidiary, near Lyon. Nexans, the world's biggest
cablemaker, Eurodisney, Aerospace and Defense Group EADS,
and most recently Hewlett-Packard have since followed suit.
Recently, Hewlett-Packard agreed to reduce the number of job
cuts proposed for its French sites from 1,240 to 940, in
return for longer working hours. That pressure is set to
continue as France's main business organization MEDEF points
to the example of neighboring Germany, where a growing
number of workers have agreed to receive lower pay in the
future, sometimes with longer working hours, in order to
keep their jobs.

Outsourcing: a local matter?
--------------


4. (SBU) An unusual initiative to monitor outsourcing and
deal more effectively with its local social and economic
consequences was taken late last year: a new inter-
ministerial committee on local competitiveness or CIACT
("Comite Interministeriel d'Amenagement de Compeititivite
des Territories) was established to cover all aspects of
local economic development. For example, CIACT will be
responsible for analyzing the consequences of technological
changes or changes in regulations on the competitiveness of
local businesses. CIACT will also identify future regional
pockets of unemployment or economic growth in order to
assess local needs for training. While responsible to the
Ministry of the Economy Finance and Industry, CIACT's
novelty lies in its search for local answers to local
problems. It is part of a trend begun under the last
(Raffarin) government to give more "economic" powers to the
regions and departments. Job search and unemployment
benefit distribution have already been brought down to the
departmental level. A better assessment of local economic
needs is but the latest step in that direction.


Reduced sick leave generates unexpected savings
-------------- --

5 (U) As part of on-going efforts to cut health insurance
spending, the French Government recently announced that
savings generated as of the end of October 2005 stood at
nearly 600 million euros. The drop in sick leave
unexpectedly accounted for two thirds of the savings. The
savings, although lower than the 1 billion euro originally
forecast, is welcome relief, since the non-discretionary
public health care budget deficit has aggravated GOF budget
problems, and could be expected to continue to put pressure
on the rest of the central government budget.
Stapleton