December 10, 2014 / 12:08 AM / 3 years ago

France bids to show reform drive with deregulation bill

French lawyers, notaries and bailiffs attend a national protest against a government reform plan to deregulate their profession in Paris December 10, 2014.Charles Platiau

PARIS (Reuters) - France's government proposed a pro-growth reform bill on Wednesday that is crucial for avoiding EU sanctions but risks being watered down by left-wing lawmakers angry with President Francois Hollande's deregulation drive.

The bill - which polls show the French themselves broadly support - aims to let shops open more often on Sundays and resolve disputes over firings more rapidly. It includes plans to deregulate the legal trade and cut red tape for construction.

It is France's attempt to convince sceptical European Union peers that the euro zone's second-biggest economy is carrying out reforms needed to get a new reprieve in March on its missed budget targets and avoid sanctions.

"Considering the emergency situation of our economy, we don't have the right to pass up this opportunity," new Economy Minister Emmanuel Macron, an ex-banker who has played a key role in Hollande's pro-business shift, said of the reform bill.

The French economy has been stagnating and data on Wednesday showed an unexpected drop in industrial output in October, a bad sign for the economy's performance in the fourth quarter.

Prime Minister Manuel Valls, a fellow reformist in the ruling Socialist party, said he was "certain" he could persuade enough lawmakers in the Socialist majority to pass the bill through parliament early next year, on time for the EU verdict.

But lawmakers to the left of the party have warned they would vote against the bill if it is not diluted and would even campaign against it, making this a major test for the most unpopular French president in polling history.

Martine Aubry, one of the Socialist party's most respected veterans, writing in Le Monde on Wednesday, vowed to fight the bid to open more shops on Sunday, calling it a "backwards" plan for France.

In another sign of the challenges facing the government, thousands of lawyers in black robes and bailiffs took to the streets of Paris in a very rare protest march just after the bill was unveiled, saying they would fight it.

Opposition to the legislation points to tough debates in parliament for the government in 2015, when it faces two sets of local elections and a Socialist Party convention in June, where politicians will start jockeying for position before the 2017 presidential elections.

"The government is therefore likely to remain between a rock (fading support for reforms at the National Assembly) and a hard place (European Commission recommendations) for some time," analysts at Exane BNP Paribas said in a note, adding that the European Commission would probably ask for more efforts.

SILVER LINING FOR HOLLANDE?

Even before it goes to parliament, the bill doesn't go as far as initial plans to take on dozens of closed professions.

"It's interesting because it deals with blockages, frictions, that have been weighing on the economy for decades and one can hope it can open doors to more reforms," Societe Generale economist Michel Martinez said.

But the bill would at best boost gross domestic product by about 0.5 percent within five to 10 years, he said, adding: "Everybody knows this will not change the face of France."

The so-called "Law on Growth and Activity" plans to let shops open up to 12 Sundays a year from five currently, with more flexibility on opening hours in tourist areas, which have long envied London's seven-day-a-week shopping culture.

That's one of the most controversial parts of the bill, because it would mean more people would work on Sundays, and Valls has already said that compromise solutions could be found on this point.

The bill also aims to open long-distance bus routes to competition and open up closed professions such as notaries -- comparable to British solicitors -- who have a lucrative monopoly on transactions like moving house.

The silver lining for Hollande, whose economic policy is judged to be failing by nearly 90 percent of French, according to a recent poll, is that close to 60 percent actually back this law.

Additional reporting by Jean-Baptiste Vey, Hannah Murphy and Alexandria Sage; Writing by Ingrid Melander; Editing by Mark John and Susan Fenton

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