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Business

Hollande’s plan to get French economy back on track

© Photo: AFP

Text by Sam BALL

Latest update : 2014-01-15

The focus on François Hollande’s private life during his press conference Tuesday overshadowed something of far greater importance for France’s future – the president’s plan to get the country’s economy moving again.

Since coming to power a year-and-a-half ago, pressure has been piling on Hollande to take measures to address France’s economic woes. His perceived failure to do so has seen his popularity plummet.

After two successive recessions in recent years, France’s economic growth remains anaemic – forecast at just 0.2 percent in 2013.

The country is also battling an unemployment rate of 11 percent and ballooning public debt currently at 95 percent of gross domestic product (GDP), while business leaders say high labour costs are preventing growth.

On Tuesday, the president finally responded.

“If France wants to keep its influence in the world, if France wants to weigh on the course of Europe, if it wants to keep control of its destiny, then it should imperatively restore its economic force,” he said.

He unveiled a number of measures designed to get Europe’s second-biggest economy back on track, including:

• A €50bn (£41.5bn) cut in public spending between 2015 and 2017.

• A reduction in the budget deficit to 3.6 percent of gross domestic product this year, and below the EU's 3 percent limit in 2015.

• The creation of a strategic public expenditure council to oversee public spending

• A ‘responsibility pact’ with businesses that will see cuts to tax and red tape in exchange for commitments to create jobs and boost training. As part of the pact, employers will no longer be required to fund family allowances via payroll taxes from 2017, reducing the corporate tax burden by €30bn.

Selling out?

The reforms represent a significant change in strategy for Hollande who has until now resisted the kind of austerity packages and tax cuts for businesses that have been seen in numerous other European states such as the UK and Spain.

However, Hollande denied that his economic reforms represented a policy U-turn or shift away from his Socialist ideals, but were rather an “acceleration” of a direction he has been heading in since election.

Nevertheless, the problem for Hollande is that voters may not necessarily see it the same way, and the president, who came to power on the back of a strong Socialist agenda, has already faced criticism in recent months due to a perceived shift towards greater economic liberalism.

Indeed, Communist Party-linked newspaper L'Humanité earlier this month dubbed him "François Blair", after the former British prime minister, following a New Year's address in which he hinted at economic reform.

After Tuesday’s press conference, France’s Left immediately accused the president of selling out.

“The speech had one goal, to curry favor with the big bosses,” said the Parti de Gauche’s Martine Billard.

But others say the measures unveiled by Hollande do not go far enough.

"At least he's acknowledged that there are issues that need to be solved for the economy to recover, but they need to do a lot more to slow down the pace of job destruction,” Ion-Marc Valahu, fund manager at Geneva-based Clairinvest, told Reuters.

Hollande’s political rivals on the right were also quick to pour scorn on his new economic policies.

“François Hollande was as ever François Hollande,” said Jean-François Copé, leader of the centre-right UMP party. “Vague, full of hot air and remnants of old Socialist doctrine behind words aimed at reassuring French businesses who are terrified by the last 20 months of the president’s policies.”

Hollande: "Am I a social democrat? Yes."

Date created : 2014-01-15

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