THE CHALLENGE OF REFORMS IN FRANCE

France faces worrying economic and social issues. The French welfare system no longer seems sustainable in the face of demographic pressure, mounting debt, and persistent unemployment.

There are, in fact, “two Frances”. Globalization per se is not the problem. Many French companies, not just the large ones, have proven adept at making the most of globalization, relying on France’s own assets as well as international ones (more than a third of the stock of the largest French companies is held by foreign funds). But there is another France made up of a substantial civil service, a large public enterprise sector—the third largest in the OECD, behind Poland and Turkey—which includes partially privatized utility companies, and numerous service sector professions (including large chunks of the retail sector) that are largely shielded from competition.

The concept of reform has become a French political nightmare and there is a feeling of distrust toward any reform.

In addition, the French political system is currently in a weak position to deal with the reform conundrum for two main reasons. The first is the level of activism at the extremes of the political spectrum. And because these extremist parties are not represented in parliament (the electoral system favors larger parties), they have turned the street into their favored terrain of expression.

The Fifth Republic is a hybrid between a parliamentary system (the Prime Minister needs the support of a majority in parliament) and a presidential one (the French president is directly elected by the people). In practice however, parliament has little power. The executive finds itself confronting non-representative trade unions, extremist parties, and all sorts of civil society groups without a parliament that can act as an intermediary or be a genuine source of political ideas. The result is that even when the government enjoys a significant majority in parliament, as is currently the case, it does not hold all the reins of power.

France could introduce the obligation for all workers to vote for a trade union, turning them into more legitimate and constructive partners for the government and probably rationalizing the trade union landscape. France would also benefit from embracing the principles of simplicity and fairness: one job contract instead of many, a simple fiscal system rather than high taxes , the disappearance of anachronistic entitlements for specific groups – all changes that would take France in the right direction. In other words, merge the two Frances into one. This can only be achieved by putting everything on the table and by broadening the issues rather than keeping them separate in small parts that are difficult to deal with. France needs coherence and a sense of destination, and a fully involved parliament.