Hollande rejects shock action to boost French businesses

France’s President Francois Hollande, caught in a storm over ways to heal the battered economy, rejected yesterday a demand by business leaders for a two-year shock plan to boost competitiveness. The Socialist leader, who also held talks in Paris with the heads of leading global economic institutions, including the World Bank, pledged a five-year action plan to revive the French industry. Vowing decisions “that will be taken in November in all the spheres of competitiveness,” Hollande spoke of a “pact” in which all players had to do their bit. “All the indicators show that we are not in the best of situations,” Hollande said after meeting World Bank chief Jim Yong Kim, the International Monetary Fund’s Christine Lagarde, World Trade Organisation (WTO) head Pascal Lamy, International Labour Organisation Secretary General Guy Ryder and the OECD’s Angel Gurria in Paris. “France is now facing triple challenges,” he said, referring to steep debt, poor growth and high manufacturing costs. He also called for more market regulation, saying what the world needed now were “mechanisms, regulation and action.” The WTO’s Lamy, who is also French, said there was a “link between growth, competitiveness and jobs,” adding: “This is the main problem for France ...and for Europe now. The heads of 98 of the biggest French groups on Sunday pleaded the case for a 30bn-euro cut in welfare charges paid by French employers over two years, and massive cuts in public spending. “With a record public spending of 56% of gross domestic product, we have reached the limit of what is tolerable,” said the Afep, which represents more than 90 of France’s top companies, in an open letter to the president. Their onslaught against increases in taxes and charges comes in the midst of growing national controversy of ways to make lagging French industry, with factory closures announced almost every week, competitive in international trade. But two leading ministers immediately rejected such radical action. Hollande, on the ropes in opinion polls and under attack for perceived muddle in the government, is grappling with pre-election pledges to create jobs and spur growth while applying austerity to plug a €37bn ($47bn) hole in public finances. “For companies, the working costs must be reduced by at least €30bn over two years by cutting the employers’ portion of welfare charges,” said the Afep letter published in the Journal du Dimanche weekly. The business leaders also called on the French government to slash public spending by €60bn — or 3% of gross domestic product — over five years. The pressures closing in on Hollande include sweeping job cuts. Auto group PSA Peugeot Citroen alone has announced the loss of 8,000 jobs and the closure of an emblematic plant near Paris. It has just been rescued with a government guarantee of €7bn ($9.0bn) for its banking and credit arm. Hollande also said he would hold annual talks with the heads of the world’s main economic institutions, who go on to Berlin Tuesday to meet with German Chancellor Angela Merkel. He said the aim would be to “take stock of the world economy, to assess where Europe lies and to draw conclusions on what we need to do.” The meeting comes amid tortuous efforts to battle the contagion threatening the euro currency zone and different approaches advocated by the heads of the bloc’s two main economies — Merkel and Hollande. Merkel believes sustainable growth requires debt reduction through austerity measures while Hollande advocates more public spending to kick start the economy.