France Outlines Virus Furloughs That Could Run for Two Years

French President Emmanuel Macron is planning a new virus furlough program that could see the state covering a large share of lost incomes for as long as two years to protect jobs.

Macron outlined the new measure in a meeting with labor unions and business groups Wednesday. Starting July 1, it aims for a compromise between blanket support and more targeted aid, by getting labor unions and businesses to strike deals on a case-by-case basis.

A jump in jobless claims during the lockdown is raising pressure on the French government to use furlough to keep people tied to jobs, even if they don’t work. While the number of claimants registered as fully unemployed declined 3.3% in May as the economy reopened, that followed surges of 7.1% in March and 22.6% in April.

The new program emulates the emergency one put in place to protect jobs during the pandemic lockdown. Companies have filed requests for furlough aid for more than 13 million workers.

If unions and business agree on a reduction of working time in exchange for job security, the government will pay 85% of furlough costs for as long as two years, an official at the Elysee Palace said. That subsidy will decline slightly to 80% for deals signed after Oct. 1.

During the idled time, the government will also finance as much as 80% of the cost of training.

“This new furlough program offers an alternative to downsizing and allows companies to retain as many jobs as possible,” Labor Minister Muriel Penicaud said in Europe 1 radio interview on Thursday.

France Outlines Virus Furloughs That Could Run for Two Years

The Elysee official said the obligation for a deal with unions would stop companies abusing the long-term system, which is designed to help struggling sectors including tourism and the automotive and aviation industries.

The state will also have to sign off on the deals, which can’t reduce working hours by more than 40%.

What Bloomberg’s Economists Say...

“The French government has confirmed its intention to maintain its emergency support for furloughed workers in place for up to two years, albeit with tighter conditions. This will prevent a steep increase in joblessness, but Bloomberg Economics still forecast the unemployment rate will peak at 12.5% in 1Q2021 -- its highest since records began in 1975. As companies are encouraged to bring their furloughed workers back before hiring outsiders, new entrants and temporary workers are likely to bear the brunt of the joblessness risk.”

-- Maeva Cousin, euro-area economist

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Gradually Withdrawing From Furlough Program

France Outlines Virus Furloughs That Could Run for Two Years

France will also copy Germany’s much-lauded Kurzarbeit system and introduce a new standard furlough, though the terms on that will be far less generous. The wage subsidy will be lower and workers can only be on it for six-month periods.

The extension of the key crisis-fighting tools comes as European governments figure out how to adapt vast emergency measures put in place to protect businesses and jobs during lockdowns.

The problem now is that the economy won’t quickly return to pre-crisis levels, so support can’t be withdrawn too quickly. On the other hand, if the money flows for too long, it may end up wasted on supporting jobs that are no longer viable in the post-virus economy, and prevent workers from retraining for better employment.

©2020 Bloomberg L.P.

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