It is hard to find a silver lining in the clouds that hover over France's economic future. Months of sustained political protest by French students forced a humiliating defeat on the Paris government, obliging it to withdraw a package of labor reforms that would have made it easier to fire first-time workers. The results highlight the increasing gap between the demands of French citizens and the realities of 21st-century economy. It also made plain the inability of the French leadership to rise to the occasion -- and lead -- when the country needed it most.
French Prime Minister Dominique de Villepin introduced the First Employment Contract, known by its French initials "CPE," in an attempt to introduce flexibility into French labor markets and bring down the stubbornly high unemployment rate among the country's youth. The national unemployment rate in France is 9.6 percent; for workers under the age of 25 the rate is near 25 percent, while in some areas, populated mostly by immigrants, it can get as high as 50 percent. The CPE would allow employers to hire workers under the age of 26 for a two-year probationary period, during which time they could be terminated without explanation. After the probation, the employee would get the standard labor contract.
The legislation was greeted by mass protests by French students. Millions took to the streets to demonstrate against a measure that they claimed discriminated against them by denying them the protections afforded other workers. They were joined by national labor unions, which called general strikes in support of the students. This proved too much for the Paris government. After the CPE was passed into law in early April, President Jacques Chirac asked businesses not to apply it. Escalating protests forced Mr. Chirac and Mr. de Villepin to backtrack completely. They used their parliamentary majority to quickly purge the law from the statutes and replace it with vocational training for young workers and financial incentives for employers to hire them, even though similar programs already exist.