Wednesday

7th Dec 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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.

No euro crisis after Italian vote, says EU

The Italian PM's resignation after a failed constitutional referendum has not changed the situation, the Eurogroup president has said. Financial markets have remained stable.

Stakeholders' Highlights

  1. UNICEFSchool “as Vital as Food and Medicine” for Children Caught up in Conflict
  2. European Jewish CongressEJC President Breathes Sigh of Relief Over Result of Austrian Presidential Election
  3. CESICongress Re-elects Klaus Heeger & Romain Wolff as Secretary General & President
  4. European Gaming & Betting AssociationAustrian Association for Betting and Gambling Joins EGBA
  5. ACCAWomen of Europe Awards: Celebrating the Women who are Building Europe
  6. European Heart NetworkWhat About our Kids? Protect Children From Unhealthy Food and Drink Marketing
  7. ECR GroupRestoring Trust and Confidence in the European Parliament
  8. UNICEFChild Rights Agencies Call on EU to put Refugee and Migrant Children First
  9. MIRAIA New Vision on Clean Tech: Balancing Energy Efficiency, Climate Change and Costs
  10. World VisionChildren Cannot Wait! 7 Priority Actions to Protect all Refugee and Migrant Children
  11. ANCI LazioRegio-Mob Project Delivers Analysis of Transport and Mobility in Rome
  12. SDG Watch EuropeCivil Society Disappointed by the Commission's Plans for Sustainable Development Goals