A priority for France’s next leader is a labour law shake-up that ends a system where you either have a job for life or little job security at all, the International Monetary Fund (IMF)’s economic policy director for Europe said. In an interview, Michael Deppler told Reuters that France needed to introduce a single employment contract that struck a balance between “insiders” with ultra-secure employment and “outsiders” who can only get precarious short-term contracts.

“They need to address this duality in the labour market and in our view they need to move towards a single employment contract,” Deppler said.

“Basically, there’s the traditional segment of the labour market where essentially you get very large protection, basically a job for life, and then a very flexible segment, ... where people basically have no job security,” he said. The IMF generally argues for what it calls greater labour market flexibility in continental Europe, code for rolling back job protection on the basis that employers who can fire more easily will also hire more readily.

Deppler was responding to questions on what France needed to do after presidential and parliamentary elections, which begin on Sunday with a first-round presidential contest.

“They’re not going to be fully successful in reducing unemployment unless they reduce this segmentation of the labour market,” he said.

Making the banking industry more competitive was also vital for the next leaders of France, along with other service sector areas such as retail that are less open to international competition, Deppler said. “Where it’s slow and falling down in terms of world league tables is in terms of performance in these sheltered sectors” said Deppler, adding that this was a problem, too, in the retail sector. Spain, Germany and Italy also had to do something in these areas, he said. “The problem with (retail) banking in France is they have certain features which are a result of historical bargains, such as you don’t pay for cheques,” he said.

“The problem is the costs show up somewhere else. And it’s the result of a political bargain way back in history about what banks should do,” he said. “It’s not very helpful. France needs to do something about lots of things like that.”

With Jacques Chirac on his way out after 12 years in power, polls start next Sunday with the first round of the presidential contest, which will be followed by a run-off and legislative elections.

Two of three opinion polls published over the weekend showed support for centrist Francois Bayrou ebbing, with Socialist Segolene Royal in second place behind centre-right Nicolas Sarkozy.

Deppler told a news conference in Washington on Saturday he believed the French election had brought new faces and offered the prospect of new policies in a country where structural economic reform has often been a non-starter. Sarkozy has pledged a break with the ways of the past and Royal has stressed the need to reform gently.

Brian LOVE</B>