As Francois Hollande announces an economic state of emergency, is France finally facing up to its sick man of Europe status?
James Sproule, chief economist at the Institute of Directors, says Yes.
Francois Hollande’s plan to confront France’s stubborn unemployment rate shows the President is more than aware that the status quo is unsustainable. The French model works if you are already in a job, but not for those on the outside, especially younger workers. Hollande can tinker with social security rates and employment incentives for smaller firms, but to clamber out of this malaise, France needs a cultural transformation. This means embracing new ideas, accepting volatility and welcoming agility. Many of the necessary conditions for entrepreneurialism exist in France, including a skilled workforce, strong product innovation and access to risk capital. But fear of failure is also high and there is less of a supportive startup culture than in the UK. For many budding French entrepreneurs, hopping across the channel would seem to offer more chance of success. Changing this will require Hollande to ask searching questions about how France adapts itself to the modern economy.
Sam Bowman, executive director of the Adam Smith Institute, says No.
France may not be the sickest man in Europe, but by any normal standard the country is in deep trouble. The reform package announced by Francois Hollande is better than nothing, but only just. France’s 35-hour week will be left untouched. France’s regulatory bias towards companies with 49 employees or fewer will be left alone too, so successful firms find it difficult to grow. The statutory powers that unions enjoy in the country’s health and social security systems will be left alone, so they will continue to have a powerful say over how the private sector is run. And the country’s strict rules around firing workers will be barely touched – which makes it riskier and costlier to hire a new worker there than it is in most other European countries. Compare this to Germany. Only 10 years ago it seemed like one of Europe’s sick men as well, but labour market liberalisation helped it to recover. France has a long way to go to get to that point.