Hollande's flagship economic reform law faces parliamentary test

By Reuters

Feb 17, 2015 07:20 AM EST

Francois Hollande faces a major test on Tuesday when his flagship economic reform bill is put to parliament, 10 days before the European Commission rules on whether France's reforms go far enough to avoid sanctions for its budget slippages.

The bill cuts red tape in a wide variety of areas including allowing more shops to open on Sundays and evenings, speeding up dismissal procedures, opening up long-distance bus routes and exposing the legal professions to more competition.

It is expected to be approved by the lower house of parliament later on Tuesday, although that might require the votes of lawmakers from other parties after rebel members of the ruling Socialist party have threatened to oppose it.

The legislation, which responds to long standing demands by the European Commission that France open up closed professions to boost its stagnant economy, is viewed as too pro-business by these lawmakers on the left of the Socialist party.

It has prompted labor unions to take to the streets in protest, while professions such as notaries, bailiffs and court clerks also oppose deregulation.

But in nearly 200 hours of debate in parliament and despite more than a thousand amendments, the government has largely stood its ground on what is France's main attempt to convince a skeptical EU that the euro zone's second-biggest economy is carrying out enough reforms to win a new reprieve on budget targets.

"The time for posturing is over," Prime Minister Manuel Valls told RTL radio on Monday, urging Socialist lawmakers to back the text. "Now we must be responsible and adopt a text that is in the general interest of the French people."

Government officials hope the law spearheaded by new Economy Minister Emmanuel Macron, who influenced Hollande's pro-business switch last year, will help boost growth but are not putting a precise figure on its impact.

Economists including Societe Generale analyst Michel Martinez have said the bill is a welcome move to cut red tape but "will not change the face of France" and will have limited macroeconomic impact -- which Martinez has put at about 0.5 percent within five to 10 years.

Polls show that while some in the Socialist party and the Greens, previously a partner in government with the Socialists, reject the text, 60 percent of the population back it.

EU Economics Affairs Commissioner Pierre Moscovici, who is preparing the Commission's ruling on France, said last week the French government must have a strategy for reform that goes beyond the Macron law. "France can and must have this," he said.

Tuesday's National Assembly vote is not final, as the bill will then go to the upper house of parliament. But while this could delay its adoption, as the government does not have the upper hand in the Senate, the National Assembly has final say.

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