Unions, Bosses Attack Sarkozy On Economic Strategy

Sarkozy offered an additional 2.65 billion euros ($3.4 billion) of social spending on Wednesday in an effort to quell labour unrest.

French President Nicolas Sarkozy faced criticism from both unions and bosses on Thursday over new measures to tackle the economic crisis, with the government facing ideological battles over its strategy.

Sarkozy offered an additional 2.65 billion euros ($3.4 billion) of social spending on Wednesday in an effort to quell labour unrest over a previous stimulus package that targeted investment rather than consumers.

Union leaders welcomed the proposals but said much more was needed and made clear they would pursue a nationwide strike on March 19 to follow up on a day of action last month that brought at least one million people onto the streets.

"My feeling this morning is that one can do better, even much better," Francois Chereque, head of the moderate CFDT union, told France 2 television. He added that Sarkozy had "an ideological block" in his head over boosting consumer spending.

But underscoring Sarkozy's delicate balancing act, he also faced anger from employers for insisting that they share out their profits equally between workers and investors.

"It's a typically false good idea," said Laurence Parisot, the head of the employers' federation, setting herself up for a showdown with Sarkozy, who has threatened to legislate on the issue if bosses do not redistribute more earnings to staff.

Unions turned on Parisot, accusing her of intransigence during their round table meeting with Sarkozy. "The conservative force at yesterday's talks were the bosses," said Chereque.

DEBT WORRIES

The government has warned that the French economy will contract by at least 1 percent this year, and analysts say unemployment could jump by 25 percent. Parisot said in this environment it was dangerous to hit company profit margins.

"What would happen if all the investors...said 'there is no more hope in France, let's withdraw our capital?'" she said.

The new government measures included benefit increases for those laid off during the quickening economic crisis and tax breaks for the poorly paid.

But Prime Minister Francois Fillon insisted that the state could not afford to artificially pump up consumer spending, with France's debt levels already set to leap to 70 percent of gross domestic product (GDP) this year against a target of 66 percent.

Underlining the problem, the European Commission has started procedures against France for exceeding the EU's deficit limits.

Clearly irritated by the move, Economy Minister Christine Lagarde accused the commission of double standards, saying it had urged countries to boost spending to help the economy.

"So they can't say on the one hand, you have to support growth by spending ... and on the other hand rebuke us," she told French radio on Thursday.

Some economists thought Sarkozy would eventually have to do more to support household spending, saying the threat of social unrest linked to a weakening economy could not be ignored.

"To be honest, we are probably going to need something five to 10 times bigger than what was announced yesterday," said Alexander Law, chief economist at research institute Xerfi.

The stakes are high in a country with a strong protest culture, and a violent strike over wages on the French Caribbean island of Guadeloupe has set alarm bells ringing in Paris.