Elysee unveils long-awaited labour market reform

The Elysee unveiled its long-waited plans for labour market reforms in a bid to reinvigorate growth in the single currency bloc's second-largest economy.

Significantly, a successful push on the jobs front by recently-elected president Emmanuele Macron was seen as a critical stepping stone for Germany to acquiesce to further fiscal integration in the euro area.

Combined, both sets of policies were believed to hold the potential to substantially improve the underlying economic strength of the bloc if fully carried out.

Among the key measures included in Paris's plans were limitations on pay-outs in case of unfair dismissals, greater flexibility for companies to negotiate pay and hour agreements and a reduction in the number of workers' committees.

In the case of the former, they would be capped at three months' worth of wages for every two years worked.

However, in a concession to the unions, severance pay would be increased from 20% to 25% of wages for every year worked at a company.

Despite a recent sharp drop in poll ratings for Macron, the third largest union in the country said it would not join the far-left CGT union in calling for protests on 12 September.

In parallel, while expressing 'disappointment', France's largest private sector union, the CFDT, refrained from calling for protests.

Macron's stated aim was to obtain the backing of the Council of State and Cabinet by 22 September and to get Parliament to sign-off on the measures by year-end.

"The approach of involving social partners in negotiations appears to be paying off as the majority of trade unions refrained from calling a strike to express their discontent," said UniCredit Research's Tullia Bucco.

"Although the labor market reform will take time to bear fruit, the government’s resolution to change the status quo is good for confidence and investment plans. Today’s successful start of the reform process will also support Mr. Macron’s credibility on the European stage."