French Businesses, Unions Skeptical of Hollande’s Promises

Employers are underwhelmed by the president’s reforms while union bosses fear job losses.

Presidents Mahamadou Issoufou of Niger and François Hollande of France deliver a press conference in Paris, May 10, 2013
Presidents Mahamadou Issoufou of Niger and François Hollande of France deliver a press conference in Paris, May 10, 2013 (Elysée)

Employers’ organizations and trade unions are skeptical of the reform pledges French president François Hollande made on Tuesday. The former are underwhelmed by the lack of detail while the latter fear job losses.

Pact

In a lengthy New Year’s press conference in Paris, Hollande proposed a “responsibility pact” with business: a €30 billion reduction in social contributions, provided companies increase hiring.

Pierre Gattaz, the head of the country’s largest employers’ union, rejects hiring targets, however, wondering, “What exactly is the magnitude of the structural reforms he announced? We need to have a clarification.”

Gattaz suggests that businesses could create up to one million jobs if they are freed from excessive charges.

Hollande made no other proposals to reduce France’s high labor costs despite admitting last year that they account in part for the country’s high unemployment rate.

Vision

The president’s allies nevertheless hail his new “social democratic” vision with Libération‎ newspaper proclaiming that Hollande has been “set free.”

However, the labor unions, his Socialist Party’s allies, are worried about public-sector job losses.

Hollande announced an increase in budget reductions from €15 to €18 billion for 2015, 2016 and 2017. Savings would come from eliminating redundant bureaucracies.

French public-sector spending last year accounted for more than 57 percent of gross domestic product. The country’s debt is expected to reach a record 95 percent of GDP this year.

Déjà vu

The leftist Le Monde newspaper points out that many of Hollande’s reform proposals were also made by his conservative predecessor, Nicolas Sarkozy.

Notably, Hollande proposed to harmonize corporate taxes with Germany — where companies pay half the rate they do in France — and reduce the layers of government.

In 2012, Sarkozy campaigned on imitating German economic policies. Hollande’s Socialists criticized those plans at the time, claiming they would dilute the French social model.

In his speech, Hollande insisted he is still a socialist. “I have not been won over by liberalism,” he said. “To the contrary, it is the state that takes the initiative.”

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