FRANCE'S REALITY CHECK

There is an increasing consensus in France, that the French economy is in the doldrums. While president Hollande keeps reaffirming that things are going to get better, few people in France believe him; even positive figures are greeted with a certain scepticism.

Here below are some interesting facts:

1. The French work shorter hours than other major European economies (1,679 hours a year, compared to 1904 hours in Germany),
2. The French retire earlier than people in other European economies (average retirement age 60.3 years in France, compared to 62.6 in Germany, and 64.1 in the UK),
3. The French take more holidays than people in most other major European countries ... 36 days per year, the same as the British, but 7 days more than the Germans,
4. The number of hours' work per year per inhabitant in France (total number of hours worked divided by total population) is among the lowest of any developed economy - 11% lower than in Germany, 22% less than in Scandinavia, and almost 40% less than South Korea,
5. French business is currently burdened by the world's highest level of payroll tax (cotisations sociales), which at 43% are far higher than in any other country. The next highest rates are found in Spain and the Czech Republic (30%), while businesses in the UK pay a payroll tax of just 11%, and those in the USA just 5%. In an increasingly global economy, this disparity is damaging for French industry, and is one of the perceived causes of endemic high unemployment in France. It has also led the French economy to suffer from offshoring, the export of jobs and manufacturing capacity to low-wage countries,
6. High tax burdens are particularly felt by small businesses. However numerous counter-measures have been introduced by successive governments to offset their effect; these include lower levels of payroll tax on workers paid at minimum wage, tax breaks for the hiring of young employees or apprentices, aids for employers in certain high-unemployment areas, and more. In all there are dozens of forms of aid available to companies – and that is a problem in itself, as finding one's way around the maze can be a daunting task. The system needs to employ hundreds of civil servants just for administration. "Simplification" is one of the most frequently heard demands made by small businesses in France,
7. The high level of corporate taxation in France is logically another of the principal causes of the falling competitiveness of French industry on the global market, and its growing trade deficit. These in turn contribute to France's systemic problem of high unemployment,
8. Employee rights - though a great advantage from the employee's point of view - are seen as another weakness of the French system, specially by employers. Many aspects of France's social systems are piloted by complex management arrangements involving the state, management and the unions - referred to collectively as "les partenaires sociaux". Though less than 10% of workers in France belong to trade unions (far less than in the UK or the USA), unions wield considerable power through their role as partenaires sociaux. Thus, over the years, successive French governments of both the left and the right have given in to union demands in order to buy stability and popularity. The result is a system whereby employees in France enjoy a high level of job protection and guaranteed salary levels. In large corporations this is not too much of a problem; but in small businesses employers frequently hesitate to create jobs for fear of being unable to lay the new employees off without considerable penalties. Alternatively they outsource work to foreign suppliers rather than employ staff locally, or resort to temporary contracts rather than offering full-time permanent jobs. This situation also depresses salaries. All this is bad for employment, since in all developed economies, it is small businesses that create most of the new jobs,
9. French public spending is running 57 percent of GDP higher than any other developed country. The government, pressed to narrow its budget deficit, is planning a modest 1.5 billion euro reduction next year.
10. President Hollande has failed to take any radical measures to reduce unemployment and restore French competitiveness. A deficit-reduction programme has been announced, but with half of the reduction coming from increased taxes, most of them on business, many economists remain underwhelmed. The timid reduction in public spending that has been announced, though causing turmoil on Hollande's "tax and spend" left wing, seems unlikely to produce the stimulus that the French economy requires, and meanwhile unemployment continues to rise, French industry continues to suffer, and the green shoots of recovery remain desperately few and far between.