A major part of France’s problem is that its $2.4 trillion economy is stagnant. The government expects just a 0.3 percent increase in gross domestic product this year.
Growth is expected to pick up a bit next year. The government has predicted 1.2 percent growth, though others say that’s optimistic.
As growth has slowed, France’s debt-to-GDP ratio has exploded, rising 30 percent since the crisis began to 89.2 percent this year.
Taxing the rich
So far, Mr. Hollande’s push to cut the deficit appears to have been received well.
Earlier this month, the country borrowed $7.36 billion in short-term debt at negative interest rates for the first time. Recently, a long-term debt auction also saw borrowing costs fall.
But analysts and business leaders say that chipping away at France’s deficit by raising taxes is not a long-term plan. Creating incentives for businesses is going to have to be part of any strategy to restart growth.
And new or higher taxes could have the opposite effect.
Guillaume de Fondaumiere, the co-CEO of video game company Quantic Dream, which has 170 employees, said he and his fellow businessmen are growing weary of being France’s boogeymen.
“We’re not expecting medals but a minimum of consideration and help that would allow us to give our best,” Mr. de Fondaumiere said.
The French government hasn’t been shy about saying that the budget bill is targeting the rich. This is, after all, an administration led by Mr. Hollande, who once famously said he did not like the rich.
Finance Minister Pierre Moscovici defended it in parliament as a law that “again puts justice at the heart of our tax system.”
Justice is the watchword of Mr. Hollande’s new team. His administration says it’s committed to balancing the budget but that how they do it — by making the rich pay more and maintaining programs for the poor — will be just as important as that they’re doing it.
Some had hoped Mr. Hollande would play on the Socialists’ history of close connections with the country’s powerful unions to reform a stagnant labor market, where both hiring and firing are expensive.