France’s president, François Hollande, launched a bid to revitalise his country’s ailing economy this week. His ‘responsibility pact’ is supposed to encourage businesses to create jobs in return for a reduction in notoriously high labour costs. He promised businesses €30bn in payroll tax cuts by 2017.
Companies will no longer have to pay charges to fund family welfare programmes, which would reduce the average total wage bill by just over 5%. This comes on top of a previous €20bn tax break for firms.
He also reiterated his commitment to cut spending by €15bn this year, and by another €50bn over the next three years. “That’s a lot, and it’s never been done before,” he pointed out. He also plans to lower corporation tax.
What the commentators said
Hollande has “undoubtedly stuck his reformist neck out further than he has before”, said Hugh Carnegy in the FT. He effectively admitted that his high-tax approach of recent years had not helped. The payroll tax cut is unprecedented, especially for a socialist government. But the details on the spending cuts to pay for it remain hazy.
Still, “the new philosophy aimed at trying to cut spending is welcome”, said the FT. Shrinking the state will be crucial if France wants to avoid long-term bankruptcy. The good news is that Hollande has plenty of room for manoeuvre.
There are three years to go before he faces the voters again, while the opposition is in disarray. He must now “summon up the will needed to recast France’s future”.
Good luck with that, said Wiwo.de. Pushing through structural change in France will take nerves of steel. Little has been done since the 1990s, when the government attempted to tackle civil servants’ pensions. A three-week strike put paid to that. If Hollande can live up to this week’s rhetoric, he will deserve a place in the history books.