April 8, 2018 / 6:42 PM / 15 days ago

Explainer: Macron's rail reforms and French union strikes

PARIS (Reuters) - France’s rail workers on Sunday launched the second wave of rolling strikes over government plans to reform the debt-ridden national state-owned railway company SNCF before its monopoly on domestic passenger rail expires.

A protester punches a dummy depicting French President Emmanuel Macron during a demonstration to call for a convergence of struggles between French railway company SNCF workers and students in Nantes, France April 7, 2018. REUTERS/Stephane Mahe

Though the reforms were not on French President Emmanuel Macron’s ‘to do’ list when he ran for election last May, the politically charged showdown with trade unions they triggered may come to define his presidency.

Why is Macron doing this?

The SNCF reform plans fit in with the 40-year-old former banker’s pledge to modernise the economy.

Macron is pro-business, pro-liberalisation and intent on tackling the deeply entrenched vested interests he believes choke growth - all of which help to explain why he chose to tackle an unwieldy, costly monopoly.

The SNCF’s monopoly on domestic passenger rail begins to expire during Macron’s 2017-2022 term.

Competitive tendering starts EU-wide in 2019, although the government and local authorities can invoke get-out clauses that will delay effective free-tender competition until 2033, or maybe even later.

A safer, more reliable and perhaps cheaper train network would be popular with its 4.5 million daily users, many of whom complain it has been neglected at the expense of decades of investment in the high-speed TGV train network.

How is Macron going about it?

Action so far has been swift and resolute. Macron’s prime minister aims to have the reform in place by summer and has said direct government decrees could be used to deliver the plan’s essential elements if met with opposition from labour unions.

Any remaining points would follow the usual path of debate and approval in parliament, where Macron’s party had a sizeable majority. A parliamentary committee is already discussing some details of the reform and a draft on a broad framework could be put to a preliminary vote as soon as April 17.

The proposed use of direct decrees has angered unions, prompting the transport minister to signal that the government will largely avoid them.

The French government used direct decrees to push through Macron’s labour market reforms in 2017, which also sparked protests and gave rise to accusations that it was skirting parliament and undermining democracy.

In parallel to any legislative changes, the SNCF’s state-appointed chairman Guillaume Pepy is negotiating internally with the unions to settle more granular aspects of company organisation.

Why all the fuss about legal structure?

Under the reform plans, the SNCF’s legal corporate status would change from a state enterprise (known as an EPIC) to what is known in many other countries as a limited or joint-stock company.

To make the SNCF more competitive, the government believes it should be a legal entity in its own right, with more independent management.

It is also under pressure to shake-up the SNCF’s structure after EU court rulings against the EPIC structure of La Poste, that led the French post office to become a limited company while remaining state-owned.

Opponents fear that creating a limited company is the first step towards privatisation and point to former state telecoms monopoly France Telecom as an example.

The government insists the SNCF will remain fully state-owned.

What else would change?

The existing 150,000 rail workers will hold on to their generous employment rights but new recruits will not be given the job-for-life guarantees and automatic annual pay increases that SNCF employees have enjoyed for decades.

Early retirement rights are also likely to vanish but as part of a separate overhaul of the French pensions system.

One of the tasks facing SNCF Chairman Pepy as he conducts his parallel negotiations is to ensure operational cost savings of around 30 percent to bring the rail operator into line with its competitors before these start vying for business on French tracks.

What is driving union anger?

Trade unions say their special employment status is not the cause of the SNCF’s financial difficulties but blame high spending on the TGV for the SNCF’s 46 billion euros ($56.5 billion) of debt.

The CGT union, the most powerful rail union, objects to the entire shake-up of the SNCF. It rejects the end of the monopoly and the liberalisation programmed under the EU’s so-called Fourth Package rail deregulation rules, agreed in 2016.

The more reform-minded CFDT union is angry about the government’s haste and its refusal to commit now to a write-off of the SNCF’s debt, which is increasing by 3 billion euros a year.

The minimum, the CFDT says, is that work conditions be dealt with in a new collective bargaining round which should conclude before anything happens to hiring status. But this could take longer than a year, according to some union officials.

What do the French make of it?

Most polls so far show that as many as three in four people back reform of the railways. They also show that a majority, albeit a slim one, see the rail strikes as unjustified.

But Macron cannot afford to be perceived as riding roughshod over the unions. Opinions can change quickly: Two polls last week showed more than half felt the government should modify its reform plans to meet the demands of their opponents.

Macron will want to keep public opinion on his side. The last time a French president and his government squared off against rail unions was in 1995, at a time of a wider protests against social welfare reforms.

Widespread public anger led to the rail reform being pulled and ultimately the government’s downfall. ($1 = 0.8143 euros)

Sud Rail labour union employees of French state-owned railway company SNCF gather on a platform at the Nantes Gare railway station as part of a nationwide strike by French SNCF railway workers, France, April 3, 2018. REUTERS/Stephane Mahe

Reporting By Brian Love; Editing by Richard Lough and Raissa Kasolowsky

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