Wednesday

26th Jul 2017

France to reform or fall behind rest of Europe, IMF says

  • Paris: France has 'deep issues' due to loss of competitiveness (Photo: Anirudh Koul)

France will fall behind its European neighbours unless it introduces reforms lowering its labour costs and boosting its competitiveness, the International Monetary Fund has warned.

"Restoring external competitiveness remains a critical priority and should be complemented by developing domestic sources of growth," the IMF said in its annual report on France published on 3 June.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The French economy is expected to shrink by 0.2 percent this year, slightly more than the IMF forecast last year (0.1%). The Washington-based lending institution also warned France that its economic recovery may be slower than estimated, as "risks of a more prolonged stagnation in Europe remain elevated."

To emerge from the slump and keep up with other eurozone countries currently undergoing deep reforms, France should focus on increasing its competitiveness by lowering its labour costs and boosting its exports.

"A powering up of the reforms launched by the government in the last six months is needed to close this gap (to other reforming countries)," the IMF said.

The French government was also criticised for raising the tax levels on high-earners.

"As the income base on which the social insurance and redistribution system is financed loses buoyancy, the increased tax burden has undermined incentives to create value," the IMF said.

Unemployment - currently at 11 percent - is also expected to rise this year, despite promises made by French President Francois Hollande to reduce it by December.

On the "positive side", the IMF lists France's demographics, high household saving rates, strong scientific research and high-quality public infrastructure.

Last week, the European Commission gave France two more years to bring its budget deficit from 3.7 percent of gross domestic product at the end of 2012 to 3 percent, the EU threshold.

France's plans to reduce the deficit to 3.5 percent in 2014 and under three percent in 2015 are "appropriate" and in line with the EU demands, the IMF said.

But Hollande last week said it was not up to the EU commission to tell France how to reform.

"We have respected our European commitment on deficit reduction. But regarding structural reforms, especially pensions reform, it's for us and only us to say what is the right way to attain this objective," he said.

France plans budget cuts in 2014

France is to cut its budget next year for the first time in over five decades in a bid to meet an EU deadline on deficit reduction.

Greece looking at bond market return

Greece could issue 3-year bonds as early as this week, for the first time in three years, amid mixed signs from its creditors and rating agencies.

Stakeholders' Highlights

  1. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  2. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  3. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  4. ACCAAnnounces Belt & Road Research at Shanghai Conference
  5. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  6. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  7. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  8. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  9. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  10. Counter BalanceOut for Summer Episode 1: How the EIB Sweeps a Development Fiasco Under the Rug
  11. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  12. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way

Latest News

  1. EU and Turkey fail to defuse tensions
  2. European law will apply 'for years' in the UK, says EU judge
  3. US votes to sanction EU firms in Russia project
  4. Journalists on trial highlight Turkey crackdown
  5. EU to give research tips on dual food quality
  6. Polish president's veto leaves uncertainties over next move
  7. EU Commission unmoved by Polish president's veto
  8. UK presses the Brexit pause button