'Fixer' French Finance Minister to push reform

1st March 2005, Comments 0 comments

PARIS, March 1 (AFP) - Thierry Breton, who quit as CEO of France Telecom to become France's new finance minister, will adopt a more aggressive approach to already announced economic reforms as presidential elections near, but his arrival is unlikely to herald a more ambitious programme, economists said here.

PARIS, March 1 (AFP) - Thierry Breton, who quit as CEO of France Telecom to become France's new finance minister, will adopt a more aggressive approach to already announced economic reforms as presidential elections near, but his arrival is unlikely to herald a more ambitious programme, economists said here.

President Jacques Chirac is betting on Breton's track record as a "fixer" to reassure the French public and European partners that France's economic woes are already being actively addressed, they said.

Breton is credited with turning around formerly state-owned France Telecom as well as Thomson, and Exane BNP Paribas economist Emmanuel Ferry views his appointment as "an opportunity" to give a "new push to the cycle of reforms underway."

"He benefits from a large stock of trust in both economic circles and the financial markets," Ferry said.

Unlike the last appointee to the post from the corporate world, Francis Mer, who was sacked and replaced by Nicolas Sarkozy last spring, Breton has "political experience, which gives him a clear advantage," Ferry said.

Ferry sees a strong political dimension in Breton's appointment, marking a change in tone to one of urgency regarding reform and public spending, if not of substance, as Chirac nears the end of his mandate.

He said the strong probability of a run-off between Chirac and Sarkozy in a primary ahead of 2007 presidential elections is an "essential catalyst to make the government far more aggressive in its economic reforms."

These reforms include notably an attempt to kick-start economic momentum based on cutting income taxes and reducing the civil service head-count until the hoped-for growth can make the scheme self-financing.

Chirac has pledged a 30 percent cut in income taxes over five years but the government is yet to achieve a public sector deficit below the ceiling of 3.0 percent of GDP set by the EU Stability and Growth Pact.

The government has attempted to address spending by reforming the social security system but faces urgent domestic concerns, notably unemployment.

French joblessness rose to a five-year high in January, hitting 10 percent of the working population and practically ensuring that the government will not meet its 2005 growth target of 2.5 percent.

Addressing reporters Monday as he took office, Breton said: "I am going to place my efforts in continuity with those of my predecessors, Herve Gaymard, Nicolas Sarkozy of course, and Francis Mer."

Natexis Banques Populaires economist Marc Touati commented that "in the context of structural unemployment sitting at 10 percent and with GDP that will struggle to reach 1.8 percent growth this year (after 2.5 percent in 2005), I find the choice of the word continuity rather worrying ..." "I have no illusions about what will happen next: continuity means more mini-reforms and a failure to tackle problems head on."

The newspaper Le Monde on Monday cited a source close to Breton as saying he is "convinced that a lot is riding (politically) on (the government's) capacity to use 2005 to curb unemployment."

Prime Minister Jean-Pierre Raffarin this month renewed his pledge to bring unemployment below nine percent by the end of the year.

Breton's predecessor Herve Gaymard, who resigned Friday after a scandal over his state-supported housing arrangements, said earlier this month the government stood by its 2005 growth forecast of 2.5 percent but admitted to "uncertainties arising from the international environment."

On a more positive note, Touati of Natexis Banques Populaires said that "at least (Breton's) reputation will give France a strong voice in negotiations with our European partners."

"There is no way France will meet its stability pact commitments this year and we need to negotiate an acceptance of this: it is not in the bag yet."

European Union finance ministers are scheduled to discuss possible compromises over the application of the stability pact on March 7-8, with the proposals due to be confirmed at the European Summit on March 23.

Touati said in order to secure concessions over the pact in the coming months, France needs a single voice speaking for it and "developing strong ties with crucial European partners, which can't happen when you have four different ministers in the space of a year."

© AFP

Subject: French News

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