INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 05925554
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 48
• Document Creation Date: December 28, 2022
• Document Release Date: August 28, 2018
• Case Number: F-2017-01874
• Publication Date: October 21, 1988

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Directorate of
Intelligence
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81.1-L)
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Z-z, 91-edit-
International
Economic & Energy
Weekly (u)
0
21 October 1988
a
(b)(3)
DI IEEW 88-042
21 October 1988
Copy 673 to"
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�Secret-
(b)(3)
International
Economic & Energy Weekly (u)
21 October 1988
9
Synopsis
France: Trade Unions Unlikely To Regain Influence
13 Fiji: Political Instability Undercuts Economic Growth
17 Sweden: Social Democrats Face New Economic Challenges
23 Saudi Arabia: Learning To Live With Less
27 International Financial Situation: Update on LDC Debt
DI Analysts
31 Briefs Energy
Global and Regional Developments
National Developments
Comments and queries regarding this publication are welcome. They may
be directed to the editor, Directorate of Intelligence,
Sccret
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International
Economic & Energy Weekly (u)
Synopsis
France: Trade Unions Unlikely To Regain Influence
(b)(3)
(b)(1)
French trade unions have increased strike activity in recent weeks to win higher
wage gains and to impress on the Socialist Rocard government the need to
cooperate with the unions. Nevertheless, we believe that the continued decline in
union power will limit their success and will allow public- and private-sector
employers to maintain the upper hand in industrial relations.
13 Fiji: Political Instability Undercuts Economic Growth
Fiji faces a formidable challenge of restoring the political stability and economic
prosperity that were shattered by two military coups in 1987. We believe that the
government's inability to resolve racial tensions between the minority native
Fijians and the ethnic Indian community will undercut progress toward restoring
stability and stimulating economic recovery.
17 Sweden: Social Democrats Face New Economic Challenges
Although the Social Democrats will largely maintain current economic policy
following their reelection last month, the Social Democratic Party (SDP) will have
to grapple with continued erosion of the "Swedish model" of labor-management
relations. Eventually, Sweden may face growing isolation from the EC if the SDP
is forced to maintain its union support by slowing or even reversing implementa-
tion of EC reforms.
111
Seeret
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23 Saudi Arabia: Learning To Live With Less
Slack oil market conditions will constrain economic growth prospects in Saudi
Arabia for the next several years, but Riyadh's substantial financial resources
should allow the regime to cover most current financial shortfalls.
27 International Financial Situation: Update on LDC Debt
Developments this week focus on Brazil, Mexico, Argentina, and the Philippines.
iv
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International
Economic & Energy Weekly (u)
21 October 1988
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France: Trade Unions Unlikely
To Regain Influence
French trade unions have increased strike activity in
recent weeks to win higher wage gains and to impress
on the Socialist Rocard government the need to
cooperate with the unions. Nevertheless, we believe
that the continued decline in union power will limit
their success and will allow public- and private-sector
employers to maintain the upper hand in industrial
relations. As a result, wage hikes will probably remain
moderate, helping the government meet one of its
chief goals of keeping inflation under control.
Labor Threatening Unrest
French trade union leaders are pressing for an end to
government wage restraint and are threatening labor
unrest if their demands are not met. Real wages were
virtually stagnant between 1984 and 1987 while
corporate profits soared, and unions hoped this year's
strong economic growth will offer an opportunity to
catch up. Public-sector workers have already widely
publicized staged high-visibility protests, including
strikes by prison guards, nurses, rail workers, and
employees of the state-owned Renault automobile
manufacturer. Moreover,
government officials believe the
popularity of the health employees strike in Septem-
ber has emboldened France's largest trade union, the
General Labor Confederation (CGT), and they expect
considerable labor unrest in the coming months.
Although the overt goals of labor are economic,
political maneuvering is fueling much of the discon-
tent. The CGT has coordinated its strategy with the
Communist Party (PCF)�its longtime mentor(
The Communist Party is probably seeking
leverage with the Socialists to strike a favorable deal
before next year's municipal elections, which would
9
(b)(3)
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allow it to maintain control in some cities.(
(b)(3)
Government Trying To Head Off Labor (b)(1)
To escape pressure for large concessions during this (b)(3)
year's wage negotiations, Rocard has taken steps since
becoming Prime Minister in May to ease labor ten-
sions. Immediately after his nomination, he empha-
sized the need for labor/management consultations.
In August, the government announced an extra
1-percent increase in civil servants' wages, which
brought this year's total wage increase to above the
official 2.8-percent inflation rate. At the same time,
Finance Minister Beregovoy called for private-sector
wage increases to keep workers' purchasing power
constant and for even larger increases by more profit-
able firms. Although the idea of more profitable
companies granting higher wage increases is popular
among workers at the plant level, national labor
leaders are concerned it could reduce their power. The (b)(31
Rocard government has also announced it will repeal (b)(3)
some of the Chirac government's antilabor legislation,
although government officials have stressed that a
"rigorous" wage policy is a mainstay of its efforts to
contain inflation. (b)(3)
(D)(i)
Labor's Decline
French labor is attempting to reverse a long-term
trend of declining power caused by structural changes
in the economy, waning worker interest in union
representation, and tough government labor policies.
According to several studies, French union member-
ship has declined at a rate faster than in other West
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DI IEEW 88-042
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The CGT's Decline
The General Labor Confederation (CGT) has lost
some of its prestige because workers apparently are
identifying themselves less with a particular labor
organization than with the whole labor movement.
The government reports that, in 1986, 25 percent of
all strikes were conducted under the banner of multi-
ple organizations, with an additional 18 percent
started by workers instead of by unions. Most French
labor analysts believe this shift of focus from the
federations will continue and will lead to less labor
militancy.
Although the CGT has suffered the greatest reduc-
tion in membership, it remains a dominant force in
French labor relations. According to government sta-
tistics, the Communist-dominated federation ac-
counted for almost half of all strikes in 1986, and
Embassy reporting suggests that it may be responsi-
ble for 95 percent of labor-caused violence. While
most French workers do not agree with the CGT's
radical politics, they tend to look to the militancy of
the CGT to help out when negotiations are going
badly.
European countries. Most estimates claim that 12 to
18 percent of the labor force is unionized, down from
approximately 26 percent a few years ago. The prima-
ry reason for the fall in membership has been the
2-percent average annual decline in industrial em-
ployment since 1976, despite an average 2.2-percent
annual economic growth. The largest falls have come
in such heavily unionized, traditional industries as
steel, shipbuilding, and automobiles. As in other West
European countries, the services sector has experi-
enced the most growth, but its lower unionization rate
has not compensated for union losses in traditional
industries.
The center-right Chirac government reversed hard-
fought union advances through legislation, but, some-
what ironically, the acceleration in union decline
occurred during the years of the previous Socialist
governments of the early 1980s. The unions welcomed
the election of President Mitterrand in 1981, and,
when deteriorating economic conditions forced the
government to retreat from its free-spending policies
the following year, the unions felt betrayed but were
reluctant to turn against the leftist government. The
unions' prestige declined further with the Chirac
government's passage of three pieces of legislation
that:
� Eased regulations on firing workers.
� Relaxed limits on the number of hours a person
could work each week.
� Docked public-sector workers for a full day's pay
even if they were on strike for only part of the day.
Growing worker apathy toward union representation
has compounded the labor movement's woes. Most
analysts point to poor turnouts in elections for repre-
sentatives to the labor conciliation/arbitration courts
as a clear signal that workers are becoming less
interested in unions. For example, almost 55 percent
of eligible workers did not vote in the election last
December, compared to 41.4 percent in 1982. Grow-
ing apathy can be traced to the increasing tendency
by trade union, especially Communist union, leaders
to be unresponsive to the rank and file. A recent
report by a French research institute asserts that the
growing detachment is because organized labor re-
ceives most of its funding from the government rather
than from union dues.
The inability of the various union federations to work
together has also added to their problems. In 1986, for
example, instead of staging a united demonstration to
protest job cuts and low wages, the three major
federations held separate marches on the same day.
We believe union leaders probably fear that coopera-
tion with other federations could reduce their individ-
ual strength and are not likely to cooperate on many
issues.
The weakening of union influence has resulted in a
marked drop in strike activity in recent years, with
substantial benefit to the economy. Working days lost
due to strikes fell from 2.3 million in 1982 to fewer
10
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than 1 million in 1987, the lowest in 20 years. The
improvement in labor relations has also helped in
increasing productivity and in moderating the growth
in unit labor costs.
Government To Retain Upper Hand
Because of the labor movement's weakness and its
lack of institutional ties to Rocard's Socialist Party,
the Rocard government will probably be able to fend
off union efforts to gain significant wage increases,
which bodes well for the government's efforts to
contain inflation. Employers and politicians no longer
automatically agree to union demands to avoid Com-
munist-led strikes, and government officials probably
realize that, if they gave in, the financial markets
would begin to question the government's resolve in
fighting inflation and would prompt concerns about
the future value of the franc and of French interna-
tional competitiveness.
If the unions perceive that the government is having
difficulty in the National Assembly, however, they
may try to capitalize on its weakness with an in-
creased agitation effort to wrest more concessions
from the government. The CGT takes its cues from
the Communist Party, which dislikes Rocard and
would like to have him replaced. On the other hand,
-11
the CGT tries every year to agitate workers but has
had little luck in recent years. Although recent strikes
have received widespread publicity because they in-
volve public facilities such as prisons, hospitals, em-
bassies, and the Eiffel Tower, they will do little
damage to the economy. In addition, the relative calm
in the private sector means there is little likelihood of
major economic disruptions in that area this fall.
The decline in union power has led to a slow change in
industrial relations, which are now characterized by a
more civilized dialogue and a reduction of the animos-
ity between management and workers. The more
democratic unions now concentrate on working with
management to help employers adapt to changing
technologies without needing to cut work forces sig-
nificantly. The Rocard government intends to contin-
ue promoting the idea of a social contract among
workers, business, and the government.
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