World Economy

France Declares Economic Emergency

France Declares Economic EmergencyFrance Declares Economic Emergency

French President Francois Hollande on Monday pledged to redefine France’s business model and declared what he called “a state of economic and social emergency,” unveiling a €2 billion ($2.2 billion) plan to revive hiring and catch up with a fast-moving world economy.

The measures he proposed, however, are relatively modest, and he said they would not “put into question” the 35-hour workweek. With his country under a state of emergency since extremist attacks in November, Hollande did not seek to assume any new emergency powers over the economy, DNA reported.

In an annual speech to business leaders, Hollande laid out plans for training half a million jobless workers, greater use of apprenticeships, and aid for companies that hire young workers.

Hollande’s Socialist government has struggled to boost long-stagnant French growth or reduce chronic unemployment, which has been around 10% for years. His chances of winning a potential second term may hinge on whether jobs pick up before next year’s presidential vote.

Hollande stressed the urgency of updating France’s labor-friendly business model in an increasingly border-free, online economy. The measures included a loosening of France’s rigid working time rules, and a bonus of €2,000 to small businesses that hire young people.

He stressed the need to integrate youth from France’s troubled suburbs, including minorities who face job discrimination, into the global economy. High unemployment in France’s North African and African communities is seen as one of the factors driving some youths to violent extremism or the drug trade.

Some measures will be included in draft economic reform laws the government is presenting to parliament in the coming weeks.

  Political Urgency

With 15 months before the presidential election, the sense of urgency is also political for the socialist leader, who has tied his decision to run for a second mandate to his ability to curb unemployment significantly this year, AP reported.

The pro-business measures taken two years ago by the president, which include €40 billion in tax breaks over three years for companies, moves to boost more flexible temporary job contracts and a plan to curb public spending, have yet to bear fruit.

Since 2012, when Hollande came to power, more than 600,000 people have joined the ranks of the unemployed at a time when joblessness has decreased in most of the other large European economies.

The jobless rate in France is above 10% against a 9.8% EU average. The rate in the UK is 5.2% and in Germany 4.25 as of November 2015. Italy and Spain, hit harder than France by the financial crisis and the eurozone debt crisis, have higher jobless rates that have proved stubborn of late.

  Out of Stagnation

France emerged from three years of stagnation last year, with economic growth of more than 1%. But the pace of the recovery of the eurozone’s second-largest economy is not enough to absorb the young graduates seeking to enter the job market every year. Despite recovering margins, companies are still hesitant to hire workers.

Under the plan, which takes effect immediately, companies with fewer than 250 workers will receive a €2,000 payout for hiring youths and unemployed people for contracts lasting more than six months at salaries below 1.3 times the minimum wage. After two years, the subsidy will become permanent in the form of a decrease in social security charges. The tax breaks previously announced will become permanent beyond 2017, he said.

Economy Minister Emmanuel Macron is urging deeper economic liberalization and reforms, saying red tape must be cut to overcome stagnation. He argued over-regulation of labor markets was stifling job creation.

France has been focused on little other than security concerns recently, but Macron said in Paris recently that it was time for the nominally Socialist government to refocus on economic reforms in order to reinvigorate the country’s stagnant economy.

France was among the few EU countries that didn’t see jobless rates fall last year, he pointed out.