Overtime is extremely uncommon even in Europe and has to be agreed upon in contract, and even then most employers just provide extra time off instead of money for full-time workers.
Sure, high performers should be rewarded using subjective metrics, which is already the case for blue collar workers. This trial gives people the opportunity to not be penalized for working less, which is the case with all the existing flexible hour arrangements. If successful, I have no doubt that this would lead to a longer term bigger change in what counts as full-time employment when it comes to taxation, immigration, and retirement.
You interview for a job -- the offer is €X @ 40hrs/wk; you tell the HR that you'd like to only work for 80% of the time since you have childcare responsibilities. HR either writes back that the job requires you to work 40hrs or they revise their offer to €0.8X.
When 80% is the new 100%
You interview, get an offer for €X @ 32hrs/wk; you tell HR that you'd like to work extra since you're really passionate. HR either writes back that you could take extra time off or they revise their offer to €X + conditional bonus of €Y.
Like you said, working more doesn't mean more productivity, and so if a company is paying more just for you sitting in front of your computer more, we're not talking about the same jobs.
And if all of this normalizes, sure, salaries would be rebased, but the negotiation changes, as described above.