Tuesday 24 October 2017

Hollande in last desperate bid to salvage his presidency

French President Francois Hollande
French President Francois Hollande

John Lichfield

President Francois Hollande will try to relaunch his foundering presidency over the next 10 days with a series of proposals to cut public spending and reduce taxes -- especially taxes on jobs and business.

The French president's new approach, though vague so far, is being compared with the abrupt U-turn towards more market-driven policies enacted by his only Socialist predecessor Francois Mitterrand during the Reagan-Thatcher era.

In a series of speeches in the next few days Mr Hollande will lay out the main lines of a new policy to reduce the cost of labour and try to arrest the slide in French industry. His new approach is described as an "acceleration" of the timid reforms undertaken since he was elected in 2012.

The new policy has been welcomed by employers, and castigated by unions and the left as a break from his statist approach of the past 20 months.

Until now Mr Hollande's government has been reducing the deficit by tax hikes and by modest spending cuts. He has tried to push back the rise in unemployment by projects such as job-creation schemes for the young.

The economy remains more sluggish than that of Britain or Germany. Unemployment has risen towards 11pc, despite Mr Hollande's promise to reverse the tide of joblessness by the end of last year. Manufacturing activity shrank in December, while increasing in the rest of Europe.

In his televised new year address last week, Mr Hollande offered a "responsibility pact" to employers. He said that he would ease the high payroll taxes, or 'social charges', which inflate the cost of labour in France. In return, employers would be expected to promise to invest in France and to create new jobs.

Mr Hollande has a habit of making dramatic-sounding promises which become less dramatic when the small print is revealed. Cutting, or shifting, payroll taxes which fund the €650bn welfare state would amount to a radical change in the country's social model.

Reductions in payroll social charges were promised, but never delivered, by Nicolas Sarkozy and Jacques Chirac. After payment of these charges the average hourly labour cost in France is €35.50, compared with €32.50 in Germany.

Will the cost of the welfare state be reduced or the burden shifted on to other taxes? No details have been offered so far.

Mr Hollande said last week, however, that he was ready to "preserve" the French social model by taking an axe to its "excesses and abuses", especially in health policy and family-support programmes.

In his new year greetings to the government, he said that he was ready to push through changes by "edict" rather than by legislation -- implying that he was willing to short-circuit opposition from the left wing of his own majority if necessary.

In an interview with 'Le Monde' at the weekend, the president of Medef, the French employers' federation, Pierre Gattaz, welcomed Mr Hollande's new departure.

He said that French employers could guarantee to create "a million" new jobs if social charges were cut, public spending was reduced and hiring and firing laws were "simplified".

ABANDONING

Trade unions and the left are waiting anxiously to see the small print of Mr Hollande's ideas but they already accuse him of abandoning the "anti-finance" promises on which he was elected. "Neither the state nor the employers' federation can force businesses to create jobs," said Jean-Claude Mailly of the Force Ouvriere trade union federation.

Some political commentators have compared Mr Hollande's change of direction with the U-turn in economic policy performed by President Mitterrand in 1983-4.

After defying the monetarist zeitgeist for two years with nationalisations and improved welfare benefits, Mr Mitterrand was finally obliged by market pressure on the franc to adjust to the liberal winds from across the Channel and the Atlantic. (© Independent News Service)

Irish Independent

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