French companies, unions question Hollande’s new vision

January 16, 2014 - 9:07:58 am
PARIS: French business raised doubts yesterday over Socialist President Francois Hollande’s plan for public spending cuts and structural reform to revive the euro zone’s second largest economy.

His allies hailed a new “social democrat” vision for France but unions said they were worried about job cuts to the army of state sector workers and far-left politicians accused him of a sell-out as he moved towards the political centre.

Hollande, who has not denied magazine allegations last week of an affair with actress, deflected questions on his personal life at a marathon news conference on Tuesday unveiling plans to find at least ¤50bn of spending cuts between 2015-2017 and cut corporate charges by ¤30bn.

The European Commission said the moves should make French business more competitive. While France’s main employers’ group broadly welcomed the plan, it rejected his call for companies to commit to specific targets for new hires. 

“What exactly is the magnitude of the structural reforms he announced? We need to have a clarification,” said Medef president Pierre Gattaz, who has suggested the French private sector could create an extra one million jobs if freed from excessive charges.

Critics say French public spending at around 57 percent of national output — some 12 points more than in neighbouring Germany — is too high while the national audit office has said that French debt at 93.4 percent of GDP is “in the danger zone”.

But Hollande’s plans prompted an onslaught of criticism from France’s hard left and even from the far-right National Front’s Marine Le Pen, who said he converted to “ultra-liberal” economics.

“It’s called social democracy ... and social democracy is on the left,” Finance Minister Pierre Moscovici, a centrist leader in Hollande’s Socialist Party, told LCI television.

“What is being proposed is a social compromise ... it is an acceleration, an amplification of our line,” he replied when asked if Hollande — who in his 2012 campaign called the world of finance his “enemy” — had committed a U-turn.

Social democracy is the term used to describe the goal of creating welfare structures and social solidarity within a capitalist economy. In Europe, it is employed most notably in Germany in the name of the main party of the left.

But whereas Germany’s Social Democrats disavowed Marxism at a 1959 conference in the Rhineland town of Bad Godesberg, France’s Socialists have never had such a moment and remain a broad grouping in which centrists rub shoulders with staunch left-wingers such as Industry Minister Arnaud Montebourg.

A spokeswoman for the German finance ministry said the proposals were “important” and Berlin had “a great deal of respect for the efforts and reform measures that have been announced.”

For over two-and-a-half hours on Tuesday, Hollande batted away questions about a celebrity magazine’s revelations of a liaison with a French film actress and the future of his relationship with official partner Valerie Trierweiler.

The setpiece event was intended to expand on Hollande’s conviction that “supply-side socialism” is needed to reform the euro zone’s second largest economy while preserving a generous welfare model cherished by most French.

Reuters
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