BATILLY, France: In a cavernous factory in eastern France, a giant robot arm sprays golden sparks into the air as it welds together a van chassis then lifts it along a production line turning out a vehicle every two minutes. The state-of-the-art Renault plant at Batilly in Lorraine - a former steelmaking region tussled over by the French and Germans for centuries - lies on the frontline of Europe's industrial battleground. The French carmaker has ploughed 150 million euros into modernizing the plant as it seeks to win an edge over rivals in industrial powerhouse Germany, 80 km (50 miles) to the east. "Our main competitor is Mercedes and to achieve what we do here, it needs two factories: not just two production lines, but two factories," said plant manager Pierre Monflier. Yet cutting-edge technology cannot make up for a drag on competitiveness from an onerous welfare and labor system that has left France struggling to regain momentum while Germany's export-driven economy has roared out of recession. During a lost decade for France's once-proud industry, its exports have fallen to barely 40 percent the size of Germany's from 55 percent 10 years ago, a government report found. The study blamed a former Socialist government's decision to impose a 35-hour week in 2000 for pushing up France's labor costs, just as Germany was reforming. Many in industry agree. France's ruling conservatives want to make overturning the 35-hour week. In an effort to address the economic imbalances that helped spark the euro zone debt crisis, France is also backing a German push for a "competitiveness pact" to goad the bloc's 17 members to tighten their belts and reform their labour markets. But Sarkozy is already shying away from tough labor reforms.
