France’s ‘economic emergency’ plan reeks of electioneering
French President Francois Hollande announced an “emergency plan” to tackle the country’s dire economic straits, including an official unemployment rate of more than 10 percent. While the president has been promising to reverse the trend of rising unemployment for nearly four years, the total number of those without work has instead risen by 1.1 million, writes GIS expert Dr. Emmanuel Martin.
Perhaps Mr. Hollande had put too much faith in the economic cycle that many expected would return the country to growth after the 2008-2010 recession. That faith now seems misplaced.
The president’s initial socialist measures certainly made it worse. Piling more taxes onto an already overtaxed economy was not exactly clever. His government’s penchant for frequently changing the rules did nothing to alleviate regulatory uncertainty.
Even supposedly pro-business measures in recent months failed to do the trick. This is because they were offset by other, anti-business provisions, including more taxes and complex "work hardship accounts" that give employees expanded early retirement benefits. Businesses remain reluctant to hire because costs associated with firing employees are high and regulations continually change.
One set of figures tells it all. Between July 2013 and September 2015 the French economy created 57,000 jobs. During the same period, the German economy generated 482,000 jobs. So it was high time for the alarm to be sounded.
France’s economic “emergency” also means looming catastrophe for Mr. Hollande’s chances for reelection in May 2017. Hence his reversion to some tried-and-true bureaucratic remedies for joblessness.
Youth unemployment, at nearly 26 percent, is of particular concern. One way to reduce that ugly statistic is to put young people to work in national service. Mr. Hollande’s plan calls for more than doubling enrollment in France’s civic service volunteer programs, to at least 150,000. That number could grow much higher in the near future, as some analysts expect participation could become compulsory.
Another proposal being put forward is a giant program to give 500,000 unemployed people job training. This will prove a handy way of removing half a million people from the unemployment statistics.
The president is also proposing a bonus of 2,000 euros for businesses that hire one new full-time employee. This is unlikely to have a big effect, since there is little evidence that entrepreneurs hire based on such incentives.
Given these measures will take time to implement, the question is whether their impact will be felt soon enough to benefit Mr. Hollande. Part of the answer lies elsewhere: public training programs are managed by trade unions in France – and they haven’t been especially successful at the task. Such measures give the president leverage over the unions and thus a significant portion of the far left. In the light of the recent revolt on Mr. Hollande’s left wing, it’s a clever strategic move.
However, the cost - at about 2 billion euros - is high. President Hollande has vowed that no new taxes will be levied, and that the new measures will only be financed through cost savings found elsewhere.
Considering the economic track records of other past governments, it is easy to be skeptical. And pre-election years are known for public spending increases. The cycle looks set to continue, unless 2016 brings a serious economic shock.