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Sarkozy, unions set for showdown on economy
Sun Feb 15, 2009 4:07pm EST
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By Francois Murphy
PARIS (Reuters) - French President Nicolas Sarkozy meets unions on Wednesday to try to hammer out an agreement on economic stimulus plans and avert fresh protests in the face of rising unemployment and tumbling growth.
More than a million people took to the streets across France two weeks ago in protest at Sarkozy's policies, demanding pay rises and protection for jobs in the face of the downturn, and trade unions have penciled in another protest next month.
Sarkozy's 26 billion euro (23.4 billion pound) stimulus plan has focused on public spending projects rather than helping consumers and workers directly. Unions and the political left have called on him to change tack.
A television appearance after last month's protests, intended to allay public fears, only weakened Sarkozy's support further.
"The outcome of my five-year term is at stake," Saturday's edition of Le Figaro newspaper, which is close to Sarkozy, quoted him as telling advisers.
French gross domestic product fell 1.2 percent in the last three months of 2008, its biggest drop in 34 years, as exports fell and retailers reduced their stock, and unemployment in December was 11 percent higher than a year earlier.
Strikers have crippled the French Caribbean islands of Guadeloupe and Martinique and, to a more limited extent, the Indian Ocean island of Reunion, demanding an increase in the minimum wage and lower food and fuel prices.
There are fears that in the current tense climate, such protests will spread. An IFOP poll for regional newspaper Sud-Ouest published on Saturday found 63 percent of respondents thought they could soon take place on the mainland.
Increasing the pressure on Sarkozy before Wednesday's "social summit," the opposition Socialists have called for a 1 percentage point cut in value-added tax and a 3 percent rise in the minimum wage to give a boost to consumer spending.
With Sarkozy so far unwilling to meet national unions' demands on boosting consumer spending, there is little room for a breakthrough to avert further protests.
"France is the only country not to act massively and immediately in the direction of purchasing power, while a consensus has been established by economists on the need for such measures alongside those in favor of investment," prominent Socialist Dider Migaud said last week.
Sarkozy has said it is only worth increasing France's public debt for stimulus measures that amount to investments for the future rather than funding consumer spending, even though that is traditionally the main driver of French growth.
He is likely to cite one of the few bright spots in last week's GDP figures in his defense -- household consumption rose 0.5 percent in the last three months of 2008, suggesting that consumers did not need further encouragement to keep spending.
Britain has cut its value-added tax by 2 percentage points but Sarkozy lambasted the move in his television address, saying it "brought absolutely no progress," angering Downing Street.
Sarkozy has said he is ready to consider measures such as cutting low-level income tax and boosting unemployment benefits, but his employment minister and his social affairs adviser repeated on Sunday their opposition to a minimum wage increase. Continued...
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