Hollande announces business-focused reforms

Tuesday 14 January 2014 18.43
Economists have cautiously praised Francois Hollande's economic programme
Economists have cautiously praised Francois Hollande's economic programme

French President Francois Hollande has announced reforms to ease the tax burden on business, reduce labour costs and cut public spending to revive the country’s stagnant economy.

He also called for France and Germany to harmonise corporate taxation and create a joint venture to help manage the transition to renewable energy, modelled on successful European planemaker Airbus.

With more than 500 journalists packed into the Elysee Palace ballroom for a formal New Year news conference, the Socialist head of state, deeply unpopular with voters, made no mention of the controversy about his private life in a 30-minute introductory speech.

"Everyone in their personal life can face trials. That is our case," Hollande said when a French reporter ventured a coy question about the allegations of an affair published by a celebrity magazine.

"These are painful moments. But I have one principle, and that is that personal life should be treated privately, respecting each person's intimacy."

Hollande detailed a proposed "responsibility pact" to reduce the tax and regulatory burden on companies in return for commitments to create jobs and boost training.

As part of that drive, employers will no longer fund family allowances via payroll taxes from 2017.

He promised a further €50 billion in spending cuts in 2015-17 on top of a planned €14 billion this year, saying they could be achieved by making national and local government more efficient while preserving France's generous social model.

In first reactions, market economists cautiously praised Hollande's economic programme, some with tongue in cheek.

"More and more, the future French economic policy will look like that of the previous conservative majority," Dominique Barbet, market economist at BNP Paribas, said in a comment.

Ion-Marc Valahu, a fund manager at Geneva-based firm Clairinvest, said: "At least he's acknowledged that there are issues that need to be solved for the economy to recover, but they need to do a lot more to slow down the pace of job destruction. He can say what he wants, but 2017 is a long way to go."

Hollande strongly defended the European Union ahead of European Parliament elections in May and vowed he would not let those who sought to destroy European integration and pull France out of the euro prevail.

A recent poll suggested the anti-EU far-right National Front could come first in the European election in France, often used to register a protest vote, ahead of both the mainstream conservative opposition and the Socialists.

His proposal for a Franco-German joint energy company caused some surprise in Berlin, but officials said the two countries' environment ministers had been working on a detailed joint energy transition plan last year, until the French minister was sacked for criticising budget cuts.

Previous French announcements of joint industrial projects with Germany have often come to nothing or little, partly because private German industrialists are reluctant to work with state-influenced French companies.