Monday , October 15 2018

Macron must see through his rail reform endeavour

The government of French President Emmanuel Macron recently announced an ambitious effort to reform the SNCF, the national railway operator. It’s an endeavor that puts Macron on a straight collision course with France’s most obstreperous unions. This is exactly the sort of direct confrontation that Macron has thus far avoided in his attempts to reform France’s sluggish economy. If the actions match the talk, it is a highly welcome development.
The news came as a surprise to most people. It was just last week that Jean-Cyril Spinetta, a senior executive for state-owned companies such as Air France and Areva, presented a government-commissioned report on France’s national railway strategy. In France, commissioning a white paper on some hot-button issue from a grandee normally signals a first-class burial of the subject. Instead, just one week later Prime Minister Edouard Philippe announced a reform agenda taking on most of the report’s proposals. Union consultations are due to start next week, with a tight two-month deadline and the warning that the government will unilaterally pass reforms by decree if it cannot get an agreement. The move amounts to a declaration of war on railway unions.
The unions responded in kind. “We will take up the challenge. This will certainly be one of the biggest social movements in the history of SNCF,” Laurent Brun, head of the left-wing CGT-Cheminots union, thundered. That was to be expected. More striking was the shift in tone from Laurent Berger, head of the moderate CFDT union. In an interview, he charged the government with “spitting in the face of railway and public sector workers.” The reformist union leader, normally known for his let’s-all-work-together rhetoric, unleashed a wholesale indictment of what he called “the Macron method” of holding pro-forma union consultations before going ahead with his plan regardless. All four SNCF unions have declared they will work together; Macron typically has tailored reforms to split unions and avoid precisely this.
Some type of reform is needed. France’s rail transport system is like much of the country’s public services — excellent but unaffordable. The country’s railways are justly the envy of the world, but also persistently unprofitable, and deep in debt.
A decade ago, consumer and freight transport were split into two entities, with the goal of turning the latter into a profitable enterprise that could subsidize the former; instead, this has compounded the losses. EU law mandates that France must soon allow private sector competition on its railway network, and SNCF will not be able to compete if it does not shed its legacy costs. All told, the French central and local governments spend 17 billion euros per year subsidizing SNCF; similar reforms undertaken in Germany reduced railway operating costs by 3 percent.
The flashpoint in the government’s intended reform is a change to the legal status of railway workers, who enjoy many benefits such as lifetime employment, automatic pay rises, early retirement and free train tickets for their families; current workers would be grandfathered in, but future workers would be hired under normal private sector rules. The government has said this would be part of any reform package, while the CGT union has called the status of railway workers “non-negotiable.” Also on the table: the French state taking on SNCF’s heavy debt burden if the company shows improvements in service quality and cost structure.
Beyond transport policy, the more important news is that the announcement shows that Macron is shifting the political chessboard. The “Macron method,” as Berger put it, has changed. He has apparently decided he doesn’t need to accommodate the unions in every instance. Last year, I criticized Macron’s labor market reforms for being exquisitely tailored to ruffle as few union feathers as possible. The result was reforms that went in the right direction but failed to deliver enough of a change to the status quo to make a real impact.
Berger’s change in tone is telling. As the head of the most moderate major union, and himself a type of Macron figure in the union world (a young, moderate reformist in a milieu of old men who see their job as defending the status quo at all costs), he was the man Macron would be expected to want to get on board first, in the way that an American president might tailor a bill specially to get a key moderate Senator’s vote.
That approach seems to be gone now. Macron is forging ahead, and damn the unions. The symbolism matters here: The railway unions are among the most radical, and also the most dangerous, since they can freeze railway traffic. Taking them on is a signal that he wants to go further with reforms. International observers and investors should welcome this shift, and hope Macron sees it through.

—Bloomberg

Pascal-Emmanuel Gobry is a Paris-based writer and fellow at the Ethics and Public Policy Center

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