Economic challenge for new French President

France's new president, Nicolas Sarkozy, will have a tall task in making reforms to improve the country's lacklustre economic performance, says the Washington Times.

Consider:

France's per capita gross domestic product declined from 7th in the world to 17th, and the unemployment rate hasn't fallen below 8 per cent in the last quarter century.

In none of the last five years has the French economy grown as fast as the average rate for the 30 industrial economies that comprise the Organisation for Economic Cooperation and Development.

Its economic growth rate during 2006 was the slowest of any nation in the European Union except Portugal.

As a share of labour costs, taxes on the average French worker exceed 50 per cent.

Sarkozy, however, does have several ideas for reform:

Add much-needed flexibility to the labour market by reducing payroll and income taxes on labour above France's legislated 35-hour workweek.

Change labour contracts to make it easier to hire and fire workers.

Reduce the power of striking workers by requiring them to provide minimum levels of services in transportation and elsewhere.

Reduce both the tax burden by lowering personal, corporate and inheritance tax rates and the budget deficit by raising growth and reducing unaffordable pension obligations in the public sector.

On the negative side, Sarkozy remains an aggressive protectionist, pledging to raise Paris's contribution for farm subsidies if the European Union agrees to reduce them and favouring competitive depreciation of the euro in order to increase exports.

In sum, Sarkozy offers some hope on France's domestic economic front if he can hurdle the huge barriers confronting him, says the Times. But he remains suspect on international economic policy.

Source: Editorial, Sarkozy's economic challenge, Washington Times, May 10, 2007.

For text: http://www.washingtontimes.com/op-ed/20070509-085430-9181r.htm

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

FMF Policy Bulletin/ 15 May 2007

Publish date: 24 May 2007
Views: 302

Economic Policy, News

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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