French Revolution

Sarkozy takes on the welfare state.

Wall Street Journal
Thursday, September 20, 2007 12:01 a.m.

Unveiling his domestic reform agenda in Paris Tuesday, Nicolas Sarkozy called for "a new social contract" for France. His proposed revision of French socialist tradition going back to Jean-Jacques Rousseau is nothing short of revolutionary. His ability to deliver will make or break his presidency.

True to character, Mr. Sarkozy came out swinging. The new President declared that France's generous welfare state is "unjust" and "financially untenable," "discourages work and job creation," and "fails to bring equal opportunity." The result: France's jobless rate is the euro zone's highest.

The President wants "a new social contract founded on work, merit and equal opportunity." He promised to loosen restrictions on working hours and toughen up requirements for jobless benefits, to ease hiring and firing rules and reduce incentives to retire early.

Cautious optimism is in order. Over the summer, his new government moved gingerly. An autonomy plan for universities was watered down. A law assuring minimum transport services during strikes, intended to weaken the unions, was as well. On the plus side, wealth and income taxes were cut and the inheritance tax abolished. Fine. But considering his strong mandate and dominance of parliament, Mr. Sarkozy didn't overachieve.


The details of this week's proposals are sketchy but provide a foundation to build on. Echoing a frequent promise, the President said the law mandating a maximum 35-hour work week ought to be further relaxed to let the French--perish the thought--"choose work over leisure." Inexplicably, however, Mr. Sarkozy refrained from pulling the plug on a law that's come to symbolize France's slothful ways.

He showed more political courage in calling for an end to state-guaranteed job security at private firms. Such legal protections discourage companies from hiring new employees and spur outsourcing. He also took on the most coddled insiders of all, public-sector workers. State employees retire earlier with full and often better benefits than the rest of the population, which picks up the tab. Train conductors legally stop work at age 50 thanks to a rule dating from when they still shoveled coal into engines.

Scaling back these benefits invites confrontation with the most powerful constituency against change in France, public-sector unions. In 1995, when Jacques Chirac tried something similar, strikes brought the country to a standstill. But this isn't 1995, and unlike Mr. Chirac, Mr. Sarkozy won an electoral mandate for change. In a Opinion Way/Ajis poll published Tuesday, 51% of the French support Mr. Sarkozy's social policy, with 38% opposed. As for the vaunted "French social model," a bare 9% wants to "preserve it as is."

One of the biggest threats to Mr. Sarkozy's revolution may yet be from Mr. Sarkozy himself. In his first four months in office, the President has revealed a populist streak. He browbeats the European Central Bank to lower interest rates and sticks his nose into big business. Such interventionism harks back to old-style French economic management and is out of tune with the approach outlined yesterday.

Mr. Sarkozy's long-awaited speech sets the stage for the most important political battle in his first term. Whatever the President does in the next five years, he can't claim to have succeeded unless France breaks out of its economic slumber. His equally ambitious foreign policy depends on it, too. The President's prescriptions for the ailing French welfare state are hard to argue with. Now if only Mr. Sarkozy will apply them.