Finance Minister explains reforms to speed up France’s recovery
Paris, 23 April 2014
The National Reform Programme and the Stability Programme
The Minister of Finance and Public Accounts made a statement about the stability programme.
After five years of stagnation, economic activity in France returned to its pre-crisis level only at the end of 2013. The economy is picking up again gradually, and growth is now in the order of 1% a year. But 1% growth isn’t enough, and more must be done, and faster, to regain more employment. The Stability Programme for the coming three years reflects the government’s economic strategy, which aims to:
strengthen France’s economy and its ability to create employment, while making targeted efforts to support low-income households’ purchasing power;
continue improving the public accounts in order to regain room for manoeuvre and reduce the public debt, without undermining growth and while securing funding for the future priorities of education, justice and security.
With the Responsibility and Solidarity Pact, companies will regain new profitability margins, contributing to the recovery of the economy and employment. Households in the greatest need will be immediately supported. The Pact should enable economic activity to be increased by at least 0.6 points by 2017 and generate an additional 200,000 jobs.
Concurrently, France is confirming its pledge to bring the deficit down to 3% of GDP in 2015 and translating into action the effort to save €50 billion to which it has committed itself. Reducing the public deficit is the condition for stabilizing and then reducing debt’s share of GDP. It’s also an assurance that favourable financing conditions will be maintained for the state and therefore for companies and households. Finally, it’s a guarantee that France’s voice still carries weight in Europe. This is a stringent effort on an unprecedented scale which will enable us to continue reducing the deficits without creating new taxes. The effort will be shared fairly among all the government departments and will rely on in-depth reforms to the state, the local and regional authorities and health insurance.
In total, this overall strategy should enable us to increase economic activity in France by 1% in 2014, then 1.7% in 2015 and 2.25% in 2016-2017. The deficits will continue to fall: 3.8% in 2014, 3% in 2015 and reaching 1.3% in 2017. The adjusted – also known as structural – balance will be near equilibrium by 2017. With public expenditure now to increase in line with inflation, its share of national wealth will decline and the debt will stabilize in 2015 before decreasing for the first time since 2006.
France has embarked on an unprecedented deficit reduction effort in the past two years, and it will be extended over the next three years. That’s the condition for the country’s sustainable recovery. (…)
The government intends fully to support the resumption of economic activity taking shape in Europe today, by continuing its ambitious reform agenda and fully addressing the threefold deficit the French economy is facing: a competitiveness deficit, public deficits and an employment deficit. In this respect, a consistent programme is being set out in the National Reform Programme, which will be reflected over the coming months in various regulatory and legislative reforms and which must be a shared goal for the whole government.
The common aim of these reforms is to boost the economy’s potential for growth. They bring together the different complementary efforts at the heart of the government’s economic policy:
a policy to reduce production costs: labour costs but also financing costs, in particular through the implementation of measures from the Responsibility and Solidarity Pact enabling employment and investment to be supported;
better competition on the goods and services markets: it’s about combating monopolies, which increase costs for companies and prices for households. So the twofold aim is to improve companies’ competitiveness through a reduction in the cost of inputs and to increase employment and households’ purchasing power.
To be fully effective, these efforts must be accompanied by European growth- and employment-friendly policies, and investment-friendly business financing. Indeed, the objective is to make the productive economy more dynamic by every means.
In this framework, the measures set out in the National Reform Programme are based on several areas for action: getting public finances back onto a sound footing; restoring competitiveness, strengthening and greening growth; reforming the labour market to enrich growth in jobs, improving purchasing power and reducing inequalities.
The first area for action is detailed in the Stability Programme.
As regards the second area for action, we have to devise an environment in which businesses can develop. Innovation policy and industrial policy are quite obviously of key importance. Indeed, French businesses’ competitiveness and France’s attractiveness depend on the effort to invest in R&D, higher education and innovation, on businesses’– especially Small and Medium-sized Enterprises’ (SMEs’) – access to funding and on the regulatory environment. The €50 billion savings plan presented by the government safeguards all the mechanisms helping to make France’s production base more competitive, particularly all the support mechanisms for research, investment in start-ups and innovation.
Improving France’s competitiveness will also involve speeding up measures to simplify the business environment. The government is pledging to present 10 new simplification measures every month and to ensure that their implementation by an independent body is followed through. (...)./.