Inglorious

20 March 2006 By Edward Hadas Follow @edwardhadas

If French government buckles in the face of student protests against its modest plan for labour reform, it will be a lame duck. Chirac s impotence also means the temptation to pander to populist policies like blocking foreign bids will increase.

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There were widespread demonstrations across France on Saturday against the government's proposed CPE (Contrat premier d'embauche). Between 530,000 and 1.5m demonstrators, mostly students and union members, participated. The CPE permits companies to hire young workers for two years with only limited job guarantees.

Meanwhile, the lower house of the French parliament accepted a change to the takeover law last Thursday. The first proposal, made on February 21, permitted the issue of warrants to existing shareholders to ward off hostile bidders. These poison pills required the approval of the annual meeting of shareholders. In the changed version, extraordinary shareholder meetings can approve the issue of warrants, meaning they can be implemented at short notice. The Socialist opposition complained that even with the modifications, the law did not do enough to protect French companies. Approval by the Senate, the upper house, is expected this week.

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