THE BUSINESS INTERVIEW

Jacques Attali, CEO of Planet Finance

Friday, November 16, 2007

Stéphanie Antoine welcomes Jacques Attali. Writer, professor and founder of Planet Finance, he also is heading up a commission for the liberation of French economic growth.

Journalist - Hello and welcome to this edition of the Business Interview on France 24. Rarely has a week better captured the dilemma enveloping France in the face of globalisation – and the need to reform its economy. On the one hand, trade unions have launched an open-ended strike in a fresh test of the government’s muscle to negotiate its far-reaching pension-reform plans. On the other hand, Europe’s finance ministers meeting in Brussels this week issued a fresh warning urging France to reform its public finances in order for Paris to meet an earlier commitment to balance its budget by 2010. Now, the main hurdle for France seems to lie in faster economic growth. The government has handed this issue over to a 43-member commission. My guest tonight is the man who chairs this commission and believes that he can find ways for France to remove the roadblocks hampering growth. Thank you for joining us on France 24, Jacques Attali.
Jacques Attali It’s nice to be with you.


Your nomination at the head of this commission encapsulates President Sarkozy’s willingness to open up his majority to prominent political leaders from the left-wing Socialist party. Do you think this backdrop enables you to reach across party lines to promote new economic policies in France?
Well, I am not a member of any party. I left the Socialist Party in 1981 when President Mitterrand asked me to serve as Chief of Staff. After that, I became president of the European Bank in London, and then President of a large France-based not-for-profit organisation with no party affiliation whatsoever. Of course, my sympathies still lie left of centre, and I am still close to my friends there. That can obviously be seen as a sign. Even though my organisation does not work specifically in France: it works across 60 countries. So this is the first time in more than 15 years that I have become involved in French issues.
But it’s true that this commission is geared up to be independent. I was free to draft the letter laying down its agenda, and I was completely free to choose its 43 members. I chose the leading experts. Seven of them are not French (one is English, two are Italian, one is German, one is Swedish, one is Swiss and one is Spanish). So our efforts to find ways of fostering France’s economic growth are very open and very transparent.


President Sarkozy has used the word rupture to talk about the sweeping changes he wants to bring to the economy. Are things all that different from the previous bout of rupture you witnessed as special advisor to then President Mitterrand back in the early 1980s?
As far as the commission I am chairing, the report we are writing and the implementation phase we expect to monitor are concerned, we are certainly looking at far-reaching reforms that compare to what we saw during the first six months of François Mitterrand’s first term in office. We are looking at vast, global reform. It is very coherent, and reaches very deep. The question of actual implementation is not up to us to answer. That is up to the government. But we are going to propose very substantial reforms.
One interesting point is that, while many governments around the world – in Great Britain, Italy, Spain, Germany, Canada and many other countries – have managed reforms over the past ten years, France has been idle. I could write a book called “While France was Sleeping”. But the point is that other governments pushed ahead. That is why we are where we are today. We have huge trumps. We could be leading the way to growth – in Europe if not the world – today. But we’re not because we have done nothing to reform over the past 15 years. And I mean our public service, our distribution system, our competitive environment, our labour market, our universities, our research, and so on. We are such an affluent nation, we are so complacent, and our elites have grown into such strange cliques that nothing has moved. That has to change.
 
So the commission you are chairing is expected to submit its conclusions by early January…
Yes, the first fortnight in January.
 
But you’ve already issued proposals to boost purchasing power, for instance…
Yes. 
  
And these proposals put the spotlight on the retail sector. Why is it so important to spur competition among retailers?
Well, first of all, it is important to spur competition across the board. Our first proposal involves giving competition authorities the same power as competition authorities elsewhere in Europe have. We have the weakest competition authority in Europe.
The whole mass-distribution issue is amazingly hypocritical. People believe that new legislation we have passed and enforced protect small businesses from mammoth corporations. But they don’t. Large corporations don’t compete. When a supermarket opens in a given area in France, it squeezes out the competition, establishes a de-facto monopoly, and pushes up its prices.
There is also an agreement to curb below-cost sales. No other country in Europe outlaws selling below cost. But, the interesting thing is that there is no such thing as a cost below which suppliers are not allowed to quote. Manufacturers and retailers agree on the cost that supposedly provides the baseline, and then mark up, so the benefits never reach consumers.
 
So the answer to that is to actually allow retailers to subtract costs covered by manufacturers from their prices.
Yes. And pass the savings on to consumers. This will drive prices down and purchasing power up. It will also nudge manufacturers and retailers to innovate (innovate marketing, products, and so on). And innovation is the core of long-term growth.
 
You also suggest lifting the 30-year-old planning restrictions that prevent chains from opening supermarkets spanning more than 300 sq m.
The interesting thing here is that there are two mechanisms. One is urban planning. Local authorities handle urban planning, but don’t have the authority to impose decisions. The other mechanisms involve commissions. Existing local retailers sit on those commissions, and have the power to enforce their decisions. So, for instance, if I want to build a hotel with more than 30 rooms somewhere in France, I need the commission’s permission. But people who own hotels in the area are on that commission and hold veto rights. So they will obviously exercise them. It’s the same if you want to open a cinema, theatre, supermarket, and so on. It reminds me of Groucho Marx, when he said he would never want to belong to a club that would accept him as a member. Except that these commissions are saying they will never accept members who want to belong to the club because they want to be the only ones. That’s the rule of the game with French laws as they stand today.
 
You also want to loosen a central trading ban on Sundays. Isn’t that going to be a cultural shock for France?
Well, we are looking at how we can go about that. We have no doubts we have to allow small shops to open on Sundays. That’s important, as long as people working there agree. And people working for small shops want to work on Sundays. Women working on part-time contracts want to work more hours and will be happy to do so on Sundays if it means they will earn more.
Second, in tourist areas such as Paris and the south of France, opening shops on Sundays will boost growth tremendously.
Third, there are specific sectors where people want to shop on Sundays and we should allow supermarkets to open more often than they today. They can open five Sundays a year today. We want to take that much further.
 
Do you know how many jobs are at stake? 
Overall, including all the reforms I have mentioned, more than one million. In retail and distribution, and in manufacturing (which is linked). We are also looking at over 1.5 percentage points worth of growth and at over 2 percentage points of inflation.
 
Your commission will also be submitting proposals to boost employment. Unemployment figures have spent the past two and a half years on a steady downward trend, but jobless youths and idle senior citizens are still sizeable problems. How are you planning to tackle them?
I can add another problem: women employment rates. They are very low. And the wage gap is ridiculous.
Youths, as we see it, should spend longer studying and training, and that’s where we hope to channel funding. The only area where we feel public spending warrants a boost is indeed higher education.
We also want to close any loopholes that prevent senior citizens from keeping their jobs. It’s hard to imagine but, as things stand today, you are not allowed to earn a degree after a certain age. You are not allowed to apply for jobs in the public sector after a certain age either. We have 52-year-olds leaving their jobs. We want to help them build their second career. We want to say there is no reason why people who want to stay on at companies that want to keep them on should leave – at 60, 65 or even 70. The way to do that is to weed out any restrictions on employment and pension schemes. If you do that, you can boost growth by bolstering the workforce.
We actually think that the big long-term issue that France will have to address is not unemployment: it is a workforce shortage.
 
Which means immigration…
Yes. We are fortunate enough to have the highest birth rate here in France. The figure is 2 right now The baseline is 2.1, but 2 is the highest birth rate, matching Great Britain.
We want to add the fact that we need more immigration. We have to be open-minded about that. I am not just talking about skilled immigrants. We need unskilled immigrants as well.

So you want to promote flexibility for employers and job security for employees…
Exactly. First of all, deregulation without security is not an acceptable option. Fairness is a precondition for innovation. We want to see new changes in the labour market. We are saying that looking for a job is a job in itself. So it makes sense to sign a contract with the agency that is helping you look for a job. That contract, as we see it, should require people looking for jobs to work hard at it, and require agencies to provide the training and opportunities that they need. And to pay people who are working at finding work. That sort of security will cut the time you spend between jobs. So it will smooth the whole redundancy and ensuing job-hunting process.

We are coming to the end of this interview but I have one last question. We are seeing how fiercely trade unions oppose pension reforms in France today. Why do you think they will agree to the sweeping changes that your commission is about to table?
First of all, I can understand the trade unions. They are upholding a pension system that goes back 100 years. So I can appreciate that they are having a hard time accepting the fact that this century-old system might change. It has to change, and I back the government’s efforts to do so. But I can understand the trade unions.
Second, we have trade-union representatives as well as CEOs on our commission, and both contribute to every issue we discuss. We believe that stronger trade unions are the only way forward. And we are working hard with them to finalise our proposals.

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