Hollande favors gradual reforms for French economy

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France isn’t in as bad shape as Spain. Its borrowing costs remain low, and the jobless rate is just over 10 percent.

However, it faces many of the same long-term problems: Rigid work rules, including the 35-hour week; high administrative costs; strict government oversight of layoffs; and generous severance when job loss is inevitable. Corporate profits end up being taxed more than 60 percent.

Since 1984, French unemployment has been below 8 percent for only 16 months.

Despite the official length of the French work week, employees actually labor on average about 40 hours weekly, according to several polls. Other surveys have found that even on vacation, a sizable number check in to the office.

“There’s a maturation that is happening in French society, even if we still have leaders who can’t admit it,” said Gerard Dussillol of the pro-market Thomas More Institute.

The French, themselves, have their limits, especially when it comes to taxes. According to recent surveys, six in 10 French think the cost of labor is hurting the economy, but fewer than three in 10 think the burdens should shift to workers.

“When you take a pay stub in France and one in Germany, and you see it costs 25 percent more in France than in Germany, you don’t need a study” to know which country will come out ahead, said Mr. Dussillol.

Meanwhile, Mr. Hollande and others fret about France’s eroding share of global GDP, which has been cut in half to about 2 percent since 1990.

The heads of major French companies came together to demand that the government lower their labor costs by a total of about $30 billion over two years.

Economists are doubtful about real labor reform under a socialist government.

“The rest of the world continues to finance the French economy,” said Jean-Christophe Caffet, an economist for Natixis.

Markets are starting to take notice.

Standard and Poor’s downgraded France’s largest bank, BNP Paribas, last month and lowered expectations for 10 others, citing high unemployment, lower domestic growth and the European recession.

“We’ve been in this kind of infernal machine for a long time,” said Mr. Dussillol. “Certain economic systems are stable for years and then suddenly it falls apart.”

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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