France reforms to boost its competitiveness (14.11.13)

In 2012 the government reaffirmed its commitment to implement a strategy for restoring stronger growth, particularly by implementing the National Pact for Growth, Competitiveness and Employment, strengthening the public finance strategy, reforming the pensions system and developing Greater Paris.

Pact for Growth, Competitiveness and Employment

“The Public Investment Bank will be the launch pad for efforts to boost our competitiveness”. Pierre Moscovici, French Finance Minister, answer to a question in the National Assembly, 13 February 2013

The Pact for Growth, Competitiveness and Employment will provide the structure for government action over the coming years. Presented by French Prime Minister M. Jean-Marc Ayrault on 6 November, 2012, its purpose is to provide businesses operating in France with the means to reposition themselves on a sustainable and offensive footing in international markets.

It is built around eight competitiveness levers, and 35 concrete decisions:

Lever 1: Reduce labour costs thanks to a competitiveness and employment tax credit” of €20 billion per year, with a phased increase over 3 years (€10 billion in the fist year)

Lever 2: Ensure strong local finance options for VSEs, SMEs and SMBs, among other things by creating the Banque publique d’investissement (BPI), which has been up and running since the start of 2013. The €42 billion BPI funding resources can draw on increased mobilization of the resources of the business savings book to the tune of €10 billion. With BPI support, SMEs will have improved access to the resources of the future investment programme (Programme des Investissements d’Avenir);

Lever 3: Support upscaling by promoting innovation. The Government has decided to spread digital technology and methods by setting up new initiatives under the Investment for the Future Programme for financing the development of strategic digital technology (supercomputing, security, cloud computing, etc);

Lever 4: Produce as a team, notably by developing agreements between businesses in the same sector so as to implement a sector-based strategy;

Lever 5: Help French companies achieve success abroad;

Lever 6: Provide training for young people and employees that focuses on employment and future opportunity. For instance, the Government will promote the employment of young apprentices in SMEs with a goal of 500,000 apprentices by 2017;

  • Lever 7: Make life easier for businesses by simplifying and stabilizing their regulatory and tax environment as follows:
  • over the next five years, achieving long-term stability with 5 key tax mechanisms for investment and business survival, notably the research tax credit;
    -* initiating a short-term focus on five areas for simplifying business procedures: a “just tell us once” procedure, single named social contributions statement, speeding up procedures applicable to commercial property;
  • rationalizing taxes levied by the end of the year
  • Lever 8: Ensure exemplary public intervention and introducing structural reforms in support of competitiveness by:
  • restoring public finances to provide a stable financial environment for our businesses (see below);
  • supporting the development of innovative growth SMEs by mobilizing public purchasing. The conference will devise a monitoring mechanism for measuring progress towards the 2020 objective of 2% of the volume of public procurement (state, operators and hospitals) being with innovative growth businesses, including those developing social innovation processes, products and services.

(source: excerpts from http://www.economie.gouv.fr/files/PR-competitiveness.pdf)

Interviewed on 28 March, President François Hollande promised an administrative "choc de simplification", a series of measures aiming to simplify administrative procedures and cut red tape that is hindering business, and boost growth. This decision is in line with the Pact for Growth, Competitiveness and Employment. For example, the Prime Minister announced on 18 April that small companies won’t be compelled to publish their accounts.

A performance-based public finance strategy

The public finance strategy consists firstly in safeguarding France’s structural adjustment effort in 2013, an effort recognized by the Commission.

Indeed, the Commission says that over the period 2010-2013, the structural deficit – that is, the cyclically-adjusted deficit – is expected to be reduced by 4.1 percentage points, i.e. more than 1 point a year on average, as France promised its European partners. Two-thirds of this effort relates to the 2012 and 2013 financial years, thanks to the measures adopted by the government in the framework of the additional budget act of 16 August 2012 and the 2013 financial laws (the Finance Act and the Social Security Financing Act). In particular, the 2012 outturn was exemplary, with state expenditure lower than in 2011 and health insurance expenditure below the figure voted for by Parliament.

To fulfil this strict strategy, the French government is committed to modernize its action and reform the pensions systems (see below).

(source: excerpts from the communiqué issued following the Council of Ministers, 27 February 2013).

A comprehensive reform of the pensions systems

The government wants a broader overhaul of the retirement system and its financing so as to improve both its competitiveness and its fairness.

This is why the government has launched consultations:

  • The conclusion of the July 2012 social summit defined goals shared with employers and trade unions:
  • guarantee a satisfactory level of pension for all generations;
  • greater equality, notably as regards disparities between men and women, but also physically demanding jobs and the situation of the young and disabled people;
  • make the system more intelligible;
  • improve governance of the pension system.
  • On 27 February 2013, the French Prime Minister established the Commission pour l’avenir des retraites [Committee on the future of pensions], making it responsible for identifying ways to ensure the balance of pensions schemes over the short, medium and long terms. Its conclusions are expected in June. The government will then launch consultations with trade unions and employers and announce its strategic guidelines and decisions.

(source: excerpts from the Prime Minister’s letter of engagement of 16 February 2013 and from the communiqué issued following the Council of Ministers’ meeting of 27 February 2013)

The government has also carried out local structural reform

The “Greater Paris” project, delivering a new public transport network by 2025

Paris is already the leading stock centre, the main gateway to the euromarkets, and has the second-largest number of foreign financial companies in Europe (500 banks and financial institutions) (source: Paris Europlace, 2012).

Since 2007, the French authorities have decided to strengthen the capital’s international competitive position with the Greater Paris project.

  • The “Greater Paris” project is designed to promote economically sustainable, solidarity-based, job-creating development in the Paris region. The emphasis will be placed on research, innovation and industrial development across an area that currently boasts 80,000 researchers, seven innovation clusters and 850 research laboratories;
  • Between now and 2025, €20 billion will be dedicated to building an automated high-speed metro system spanning 100 miles, linking major economic and urban centres (57 new stations), while a further €12.5 billion will be spent on modernizing the existing network;
  • Between now and 2020, the Saclay Plateau (south of Paris) will become Europe’s largest science and technology hub.

(source: Invest in France Agency)

France redoubles its efforts by launching several sectoral reforms

  • the government will propose a consumer bill to reinforce consumers’ rights and thus their purchasing power;
  • a railway reform bill will be proposed in the first half of the year;
  • a bill is aimed at stimulating housing supply by overcoming obstacles to construction;
  • proposed reforms in the framework of the energy transition debate, to make our energy spending more competitive and direct it towards high technology.

All these reforms will be outlined in the national reform programme the government will present to parliament and the EU Commission, along with the stability programme.

Source : french embassy in UK’s website

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