Top French Business Leaders Plead for Big Cuts in Labor Costs, State Spending

Oct. 29, 2012
  The heads of 98 leading French companies said, "Our (profit) margins are at record lows," they said, also evoking the record unemployment level which has breached the three-million mark to a rate of more than 10%."  

French President Francois Hollande was under new pressure on Monday to ramp up the competitive position of lagging French industry after top business leaders demanded a 30-billion-euro (US$39 billion) cut in welfare charges paid by employers and big cuts in state spending.

Hollande, who is grappling with pre-election pledges to create jobs and spur growth while being forced to embrace austerity to plug a 37-billion-euro (US$47 billion) hole in public finances, was set to discuss the issue with the heads of the World Bank, IMF and other top financial institutions in Paris.

The heads of 98 leading French companies said in an open letter to the president: "With a record public spending of 56% of gross domestic product, we have reached the limit of what is tolerable."

They said in the letter in the Journal de Dimanche weekly newspaper: "For companies, the working costs must be reduced by at least 30 billion euros over two years by cutting the employers' portion of welfare charges."

They also called on the Socialist government to slash public spending by 60 billion euros -- or 3%of gross domestic product -- over five years.

"Our (profit) margins are at record lows," they said, also evoking the record unemployment level which has breached the three-million mark to a rate of more than 10%.

But Finance Minister Pierre Moscovici on Monday rejected the demand by the Afep, which represents more than 90 of France's top companies, saying he did not "think" that this could be done.

Moscovici said this was because the Afep's suggestion that the cut in employers' welfare charges could be offset by reduced public spending and an increase in value-added tax would cut into "the purchasing power of the French", who were "clients" of these firms.

He underscored the need to "make a historic effort to reduce our deficit."

The renewed pressure comes ahead of a government-sponsored report on the issue, which is due this week.

The author of the report Louis Gallois, a former head of European aerospace group EADS, had stirred up a hornet's nest and sparked union outrage by saying that France needed a competitiveness "shock" and evoked the scrapping of payroll levies paid by employers by as much as 50 billion euros. is idea was to shift a part of the tax burden on to workers by increasing the so-called CSG levy which helps fund the social security system.

Prime Minister Jean-Marc Ayrault, in a bid to soothe concerns voiced by leading unions, said the programme could "be spread over two or three years" and stressed it would not be a "shock" but more of a "holistic plan."

Laurence Parisot the head of France's MEDEF employer's union has also called for a "competitivity shock" that could be spread over a few years although other analysts believe a one-time-only reform is necessary.

Copyright Agence France-Presse, 2012

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