France 'facing irreversible decline'expert panel warns

19th October 2004, Comments 0 comments

PARIS, Oct 19 (AFP) - France must learn to work harder and rein in its "excessive" public sector if it is not to sink into irreversible economic decline, a committee of experts led by former IMF chief Michel Camdessus warned the government Tuesday.

PARIS, Oct 19 (AFP) - France must learn to work harder and rein in its "excessive" public sector if it is not to sink into irreversible economic decline, a committee of experts led by former IMF chief Michel Camdessus warned the government Tuesday.

Commissioned by Finance Minister and presidential hopeful Nicolas Sarkozy, the report painted a depressing picture of a country hampered by unemployment of nearly 10 percent, declining productivity and investment and permanently low growth rates.

Proposing radical reforms, the report said these obstacles could be overcome by an economic "leap forward" and recommended a series of measures to restore labour incentives, encourage technological innovation, reduce the debt overhang and safeguard the country's system of social benefits.

It warned that public debt, which has tripled as a proportion of gross domestic product in the past 20 years, as well as heavy public spending, were jeopardising the state's capacity to cope with future problems.

France repeatedly has been under fire for breaching a European Union budget rule that caps the public deficit at three percent of output.

The report's recommendations were immediately welcomed by Sarkozy, who plans to resign his post next month to become a candidate to lead the ruling Union for a Popular Movement (UMP) party. He has already indicated the proposals will form the basis of the party's economic manifesto ahead of his probable presidential bid in 2007.

"I identify with this report because it says three essential things: that it is urgent to carry out reforms in our country, that reforms are not to be seen as a punishment, and that the number of public workers can be reduced in exchange for productivity gains," Sarkozy said.

But trade unions, as expected, began to register their protest against the report's liberal economic tone and its strong rejection of the theory of reduced working hours - which has underpinned recent unsuccessful attempts to fight unemployment.

The country's most powerful union, the CGT, said the plan's measures were "window dressing that will not lead to real change."

Camdessus, describing France as in the grip of a "surreptitious stalling process", said the severity of the country's problems was masked by a number of factors including historically low interest rates and the equally poor performance of many eurozone partners.

"A serious syndrome of denial is setting in which curbs all but superficial reforms. But the fact is we are indeed stalling, and if nothing is done to overcome the pernicious phenomena which we have observed, in about 10 years it will lead to an irretrievable situation," the report said.

The report identified the main problem as France's "work deficit", caused by low working hours and structurally high unemployment rates - especially among the young and the old - and it called for an end to the "share-out logic" which has led to the compulsory 35-hour week in a bid to create jobs.

"If we are growing less quickly it is because we do not mobilise our labour resources sufficiently. Over 20 years the entire growth gap separating us from the US and Britain corresponds to the change in working hours," it said.

Among the report's recommendations to open up the labour market were a flexible new work contract, a tax on companies that sack staff, and encouragement for the over-50s to work part-time. On the 35-hour week, it supported a "new notion of personalised, voluntary overtime".

Retired people should be permitted to work, cumulating pay and pension. Camdessus was also highly critical of France's state sector, which now consumes some 54.7 percent of gross domestic product (GDP) yet "is increasingly unable to respond as it should to the demands of society."

"Like one of the great clippers of the end of the 19th century, the state is encumbered by a set of sails that are too heavy and complex and finds it ever harder to manoeuvre effectively to repond to our most urgent problems," the report said.

Warning that the "social model is being borne on the backs of our children," the report called on the government to replace only half of the large numbers of public employees who will retire in the next decade.

© AFP

Subject: French News

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