François Hollande
PHOTO: AFP/Getty Images
François Hollande's socialist government, facing a grim economic outlook, has promised a flurry of reforms.

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François Hollande's socialist government has promised a flurry of reforms

facing a grim economic outlook and stung by recent attacks on its tax and industrial policies

(Financial Times) —  

François Hollande’s socialist government, facing a grim economic outlook and stung by recent attacks on its tax and industrial policies, has promised a flurry of reforms in an attempt to convince a doubtful electorate that it is up to the task of fixing the country’s ills.

“France is facing a particularly difficult situation,” President Hollande told his government’s first meeting of the year on Thursday. He pointed to “feeble growth caused by recession in Europe, unemployment rising continuously for two years, industrial frailty and national cohesion undermined by years of crisis”.

In a concerted effort to regain the initiative, Jean-Marc Ayrault, the prime minister, issued a five-page “programme of work” for his ministers, promised 15 new laws and repeated the government’s insistence that it is committed to structural reforms demanded by France’s European partners.

Mr Ayrault pledged in an article for Le Monde newspaper to “profoundly renew the French model to adapt to the present . . . without renouncing our protective social system”.

Acknowledging that countries such as Germany and the Scandinavian states had survived the economic crisis “better than us”, he added: “France must be more open to risk-taking, social and economic innovation and the creation of enterprises as much as artistic creation.”

Commenting in Le Monde’s rival, Le Figaro, the liberal economist Nicolas Baverez said the French economy posed “the biggest risk” to the eurozone in 2013. “The big choice that will emerge in 2013 is clear,” he said. “Voluntary reform . . . or reform forced under pressure from the financial markets, the International Monetary Fund, the EU and Germany.”

Public scepticism about the government has deepened recently. It has run into opposition to its policy of heavily taxing the rich, pitching it into a public spat with popular actor Gérard Depardieu; it split its own supporters when it first threatened to nationalise an ArcelorMittal steel plant threatened with closure, then reached a compromise deal with the company.

Approval ratings for Mr Hollande and Mr Ayrault have slumped since September to about 35 per cent, with one recently putting Mr Ayrault as low as 30 per cent.

With media criticism mounting, Mr Hollande was forced on Thursday to show his public backing for the prime minister. Citing Mr Ayrault’s “seriousness, devotion and loyalty”, he said: “I reaffirm my confidence in him.”

In his “programme of work” for the government, Mr Ayrault set out a broad range of policy initiatives, most already under way, covering the public finances, labour market reforms, industrial competitiveness, education and housing – all with the priority of reversing the rise in unemployment, which has surged above 10 per cent of the workforce, by the end of the year.

He promised long-awaited details on how the government will fulfil its pledge to cut France’s huge public spending bill by the spring – it has committed to €60bn in savings over five years. He said public spending had “lost its effectiveness”, rising from 52 to 56 per cent of national output in the past five years “without our quality of life progressing”.

But so far the government has said only that it will cut out inefficiencies and has not yet spelt out reforms of its big welfare programmes demanded by its critics.

Likewise, Mr Ayrault said there would be “ambitious” reforms of France’s rigid labour market regulation by the end of the first quarter that would “open up to companies the ability to adapt which they need and offer workers the necessary security”.

But he made it clear that business, currently negotiating with trade unions on the issue, would be expected to make concessions in exchange for the increased flexibility it is seeking in hiring and firing conditions, wage-setting and working time.

Any legislation would include worker representation on company boards, limits on “certain remuneration behaviour” and protection against hostile takeovers, Mr Ayrault said.