The economic situation in France is “catastrophic” and “if France were a company, it would be close to liquidation,” Pierre Gattaz, head of Medef, the employers’ federation, said this week.
“There are no signs of recovery,” he said. Among other necessary steps, Socialist President François Hollande must make it clear he will abandon the 75 percent tax on high incomes: “It is a symbol which, like the 35 hour [work] week, went around the world and was destructive,” Gattaz said.
Gattaz’s comments came despite efforts by socialist President François Hollande to woo employers and investors with a “Responsibility Pact,” a policy initiative that was meant to be pro-business.
To stabilise the debt of 97 per cent of GDP and make room for tax cuts, earlier this year Hollande promised more than €50bn (£40bn) in public spending savings over the next three years, on top of €15bn (£12bn) this year.
The pact promised €41bn (£32.5bn) in cuts in taxes and expenses for business – in a country where 50 per cent of labour costs are taxes — over three years in exchange for commitments on investment, hiring and training.
But Gattaz says there is still no confidence: “There is no more investment or recruitment. What I see above all among business leaders is the waiting, the mistrust.”
Hollande, already the least popular president in post-war history with an approval rating stuck at 20 per cent, the next day made a personal attack on Gattaz, saying he had not “mastered” his form of expression: “I believe there is a problem with his language,” Hollande told a dinner for the presidential press corps on Tuesday.
The president insists the recovery is “real but fragile.”
He threatened that Gattaz’s “black” and “pessimistic” comments “may have economic consequences.”
But Gattaz is not alone in believing the French government’s policies are wrong. There are doubts in Brussels, too.
Hollande intends to nominate his outgoing finance minister Pierre Moscovici as France’s new European Commissioner. The president has indicated he expects such a “high powered” appointee to be given the economic affairs portfolio.
However, because of the way the French government has pushed against German austerity demands in the eurozone and failed to join the recovery being enjoyed by Britain and Spain, it is likely the EU elite will ensure Moscovici is given something to which his French ideas can do less damage, such as the energy portfolio.