France's Hollande Urges Compromise to Boost Economy

July 9, 2012
Says increasing competitiveness one of three great challenges facing country.

President Francois Hollande urged France to adopt a culture of compromise as he addressed unions and employers on Monday amid efforts to kickstart the country's recession-threatened economy.

In a country famed for labor strikes that can paralyze swathes of the economy, Hollande proposed a model similar to that in neighboring Germany where "social dialogue" can head off damaging disputes.

"France has not developed a culture of negotiation," Hollande said, as he opened a two-day "social conference" in Paris saying the most efficient economies are "those able to forge lasting compromises."

He said France needs to "make our social model evolve to better guarantee" the country's financial security, adding that controlling public finances and reducing the debt were a question of France's "future sovereignty".

He proposed giving social dialogue more prominence in the debate over the country's economy and even to "inscribe its role in the constitution".

"The moment has come to put France in motion, there is no time to lose," Hollande told about 300 people gathered for the conference.

He said the country was facing "three great challenges": controlling public finances, increasing competitiveness and tackling rising unemployment.

Hollande earlier met with the heads of France's five top unions and its three employer organisations for talks on how to relaunch France's troubled economy, which some fear is headed for a recession.

The Bank of France on Monday confirmed an estimate that the economy will shrink by 0.1% in the second quarter -- the first quarter of negative growth since France emerged from recession in the spring of 2009.

A second contraction in the third quarter would mean France joining other EU countries like Britain, Greece, Italy, Portugal and Spain in recession.

But in a sign France remains attractive to investors, the government borrowed for the first time at negative rates on Monday.

The French government raised almost six billion euros ($7.4 billion) in short-term debt at below-zero rates, joining Denmark, Germany and The Netherlands in attracting investors willing to pay to hold their debt.

Hollande's new Socialist government last week announced 13.3 billion euros in extra taxes on big business and the rich to meet deficit targets and balance its budget by 2017.

The government also lowered its growth forecast for this year to 0.3% from 0.4% and for next year to 1.2% from 1.7%.

Is Lack of Competitiveness Stifling Economy?

France's trade deficit remains high and ministers have raised concerns that low competitiveness is stifling the economy and hampering job creation.

Heading into Monday's talks, CGT union chief Bernard Thibault called for "concrete measures" and "immediate decisions" on job creation and security, and for a "state industrial strategy".

The head of the MEDEF employers' group, Laurence Parisot, however said the talks should focus on boosting French competitiveness.

"We want all future policies to have a common thread: the competitiveness of France and its companies," she told newspaper Le Journal du Dimanche ahead of the conference.

Parisot said she would push at the talks for more flexibility on the labor market and for Hollande's government to reconsider its scrapping of a plan to lower employer social charges by compensating with an increase in the value-added tax.

Hollande, who in May defeated right-winger Nicolas Sarkozy for the presidency, has moved quickly to cement his left-wing credentials, boosting taxes on the rich, vowing to create thousands of public sector jobs and allowing for slight spending increases. But he has also vowed to balance the budget by 2017.

Union representatives said the talks with Hollande had gone well and were held in a better atmosphere than during previous negotiations with Sarkozy.

"You know, the president has a sense of humour. Nicolas Sarkozy was divisive, causing stress, Hollande is soothing," said Jean-Claude Mailly, the head of the FO union.

Francois Chereque of the CFDT union said the meeting was held "with a kind of relaxation that was missing in recent years," while Parisot said it took place in a "respectful" atmosphere.

Copyright 2012 Agence France-Presse

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