France faces a long battle ahead

So much for the ‘grande nation’, says Germany’s Die Welt. The only thing grand about France these days is its failure to get anything done to bolster growth and get on top of its debt. No wonder ratings agency Standard & Poor’s has downgraded the country for the second time in as many years.

It has already been given two extra years to get to grips with its budget deficit, but will still struggle to trim the annual overspend to 3% of GDP next year.

France “has reached the limits of what can be taxed and needs to trim back the size of the state”, says Ian King in The Times. Public spending accounts for 53% of GDP, the highest figure among large eurozone states.

But President François Hollande is loath to cut public spending for fear of upsetting the unions. He has focused on tax hikes, which are now sparking popular revolts and government retreats.

Meanwhile, vested interests have stymied all but the most minor labour-market reforms. This will do little to reverse the deterioration in France’s competitiveness, says Hugh Carnegy in the FT.

Between 2000 and 2013 salary costs rose by 45% in France, compared to 24% in Germany. Hence the slide in export market share in that time. France, says AXA’s Matthew Cairns, “has a long battle ahead of it”.