Since May 2007, I have had the honour of serving our country under the President of the Republic’s authority drawing support from a majority to whom this evening I would like to pay tribute. As important elections draw near, any government is tempted to act prudently or do things for the sake of appearance. President Sarkozy has refused this, since in his eyes political perseverance is the option most in the national interest.
He has tasked me with leading the new government. It’s a government of action with a twin mandate. The first is to implement the 2007 commitment to build a modern France. The second we didn’t seek, but it’s the one we have received from history and it’s to manage the worst economic crisis since the Great Depression of 1930. (…)
My question is a direct one: do we still want to modernize French society?
Will the pitfalls of the crisis, hubbub of opposition voices or whims of the opinion polls stifle our will to reform or will they, on the contrary, increase our determination? Some people would like to see us delay, call off the reforms and go back on what we’ve done.
Go back on what we’ve done?
TRACK RECORD/FINANCIAL CRISIS/GLOBAL BALANCE OF POWER
I take responsibility for our track record because those who shirk their responsibilities don’t deserve to have them!
And moreover what could we be ashamed of? Reforming the universities? Reforming the pension system? Rebalancing our institutions? Establishing the minimum service requirement [in the event of strikes]? Stopping the spiral of crime? Making a success of the Grenelle Environment Forum (1)? Successfully fighting the worst series of nightmares a capitalist system can produce? Should we now mark time to get forgiveness for taking action despite the protests? (…)
We are battling with the realities of a new world traumatized by a brutal recession. With you, we have got over the shock.
Together, we have attenuated its impact for the French by succeeding in limiting the recession to 2.6% compared with 4% in Europe and keeping unemployment below the 10% threshold. Together, we have curbed the lethal momentum in Europe by rescuing the financial system, then Greece, and today Ireland.
But, ladies and gentlemen, the crisis isn’t over. It is continuing to mutate. Europe is threatened with stagnation and the insolvency crisis hasn’t yet been arrested.
But above all – and this is certainly what’s most important – the crisis has speeded up the tilting of the global hub towards Asia, and the whole hierarchy of the balance of power which emerged from the nineteenth century is being redrawn.
In 2010 China became the world’s second largest economic power, overtaking Japan. She has become the leading global exporter and has snatched from the United States the position of leading exporter of high-technology products.
With 84 million university graduates, the world’s factory is about to become the world’s laboratory. And we will have to wait several decades for the country’s domestic development to create the conditions for more balanced competition.
India and Brazil are also advancing, at a fast pace, and we have whole continents which are rising up and challenging us.
Already, the United States is suffering from this. So how would we not be lashed by this wind of history? (…)
With a debt of €1,600 billion, France has no hidden treasure to enable her to dispense with her efforts. (…)
I tell the French that the recovery has begun. Our growth rate in 2010 will be above 1.5% and the 2% target for 2011 is clearly within our grasp. But we must improve still further our economic and scientific competitiveness. We must get rid of the deficits in order to keep interest rates as low as possible to regain room for manoeuvre. We must go on remodelling our social legacy and not make our acquired rights a cushion for our lethargy.
This way and only this way will solidarity and equality of opportunity be safeguarded. We have to find, with our main European partner, Germany, the strength to take Europe with us and build an economic governance for the Euro Area. For this, our economic and financial credibility must be as robust as that of our neighbours who are ten years ahead of us in terms of reforms.
Finally we must – and it’s the task President Sarkozy set himself when taking on the G20 presidency – rethink global governance, strengthen financial regulation, combat commodity volatility and rectify currency distortions. A vast ambition, in the view of the greatest sceptics.
But weren’t they already saying the same thing when Nicolas Sarkozy woke up the G20 right in the middle of a financial storm?
France is going to fight to convince her partners of the need for a better balanced and better regulated world and thereby be true to her universalist message. This is the message which, with Michèle Alliot-Marie and Alain Juppé, we will take up through diplomatic channels, but also through the force of arms when that is necessary.
In Afghanistan, we will pursue our strategy of making the country safe and secure, reconstruction and transferring responsibility to the Afghan authorities. The fight against nuclear proliferation will lead us to maintain the pressure on Iran. The NATO strategy revamp decided on at the Lisbon summit has to be the opportunity finally to lay the foundations of a collective security system stretching from the Atlantic to the Urals. We are working tirelessly to resolve the plight of our hostages. We counter terrorism through constant vigilance and the Republic’s strength of character. (…)
Our first priority is to achieve growth to increase employment. What are the conditions for this?
First, we must strengthen competitiveness. We have a bedrock for doing this.
With Valérie Pécresse, we have given the universities the power to fight on equal terms in the battle of intelligence; with Christine Lagarde, we have abolished the taxe professionnelle [a business tax based on capital and turnover] and tripled the credit impôt recherche [R&D tax credit, designed to increase firms’ competiveness by bolstering their R&D effort]. (…)
By deciding to devote €35 billion to investment in up-and-coming sectors, as Alain Juppé and Michel Rocard’s report proposed to us, we are going to strengthen these strategic sectors.
Ladies and gentlemen, in the next few months, over 100 projects are going to be selected.
€19 billion will be allocated to higher education and research, €6.5 billion to industry and SMEs, €5 billion to sustainable development and €4.5 billion to the digital economy.
On the one hand, this massive investment to seek growth in the most promising segments of the economy and, on the other, budgetary stringency to reduce our deficits – so this shows you how balanced our economic policy is.
Ladies and gentlemen, words aren’t enough. There will be no more extra public expenditure to relaunch growth. On the other hand, it’s our duty to offer our companies long-term finance to support their development. We must steer savings into long-term investment and particularly in shares, and into public interest projects.
Rather than fuelling speculative bubbles, financial engineering must be used to support the real economy and jobs.
EUROPEAN VENTURE CAPITAL FUND/EUROPEAN PATENT FUND
To this end, within the European Union France will propose the creation of a European venture capital fund to help innovative companies and a European patent fund to capitalize on the results of research.
Sustainable development is also an instrument of our growth. The Grenelle Environment Forum commitments will be honoured in full.
Creative and not punitive ecology – creative ecology is a source of jobs. It’s the means of delivering tomorrow’s technologies! It’s the mark of a society which knows how to capitalize on its resources and doesn’t ruin its heritage, and in so doing adds to our territory’s attractiveness. This is the message Nathalie Kociusko-Morizet will take to the Cancún negotiations.
How can we strengthen our competiveness without talking about taxation?
Our tax system is a masterpiece of complexity.
To the extent of affecting its efficacy and even fairness. Our compulsory contributions are four percentage points higher than the European average.
And corporation tax is five percentage points higher than the average in our European neighbours!
In view of this, my first commitment is that there won’t be any tax rises.
And, secondly, I firmly believe that the status quo is impossible! We have already done a lot with the R&D tax credit and reform of the taxe professionnelle. We are going to continue acting, sticking to three principles: the tax system must benefit our competitiveness; the tax system must try to be fair and the tax system must be transparent, so it must be as simple as possible.
With the tax shield (bouclier fiscal), we tried to limit the effects of a maladjusted tax system, but – it has to be said – without dealing with the root problem. President Sarkozy is today proposing that we get down to work on a far-reaching reform of wealth tax. First of all, I want to say that this must be done with the yield remaining constant and with due regard for a cardinal principle of our tax system since 1789: everyone contributes according to his or her ability, since to be legitimate, tax has to be fair!
We will say what we’ll do before summer 2011 and do so following a comprehensive review with our German neighbours.
I have to say, moreover, that from this point of view, what is happening today in the Euro Area shows the urgency of the need progressively to narrow the differences between the tax systems of the countries sharing the same currency! In January 2011, the French Audit Court (Cour des Comptes) and German Federal Finance Academy will submit to us a comparative diagnosis. And this diagnosis will form the basis on which the legislation will be drawn up – we won’t be starting off with any preconceptions.
PUBLIC SPENDING/PUBLIC FINANCES
Stringent management of public spending is the second condition for growth. With the stability programme and multi-annual public finance estimates Act which you passed, we have mapped out the policy for this recovery effort. While the deficit has reached 7.7% of GDP in 2010, we will get it back to 6% in 2011, 4.6% in 2012, 3% in 2013 and 2% in 2014. This virtuous trajectory demands an all-out effort! On the part of the State, of course, but also on that of those responsible for our social welfare systems and local authorities.
Under these conditions and only under these conditions, the public debt will be stabilized as from 2012 and start to come down thereafter.
As far as the State is concerned, I have drawn up a budget for the years 2011-2013, based on stabilization in current euros of expenditure excluding debt and pensions over the whole period. This also applies, as you know, to State funds going to local authorities, which are frozen in value. As regards civil servants, with François Baroin and Georges Tron, we shall pursue the policy of not replacing one out of every two retirees which was initiated at the beginning of this Parliament. Every year, the number of civil servants is decreasing by over 30,000. (…)
We are keen to write into our Constitution principles guaranteeing control of public finances. So the government will soon give the political groups a policy document so that together we can see if a consensus can be achieved on this. (…)
FRENCH ECONOMY/FINANCIAL CRISIS
No, we won’t promote economic efficiency and budgetary stringency at the expense of social cohesion. In the crisis, all our solidarity mechanisms have been triggered. And while, admittedly, the French have “tightened their belts”, it is fair to say too that we have protected them as best as possible.
Our social shock absorbers have played their full role and I want to say that most of our neighbours haven’t had the same privilege.
Even at the height of the crisis, purchasing power rose: +1.6% in 2009, +1.3% in 2010. On the prices front, with the Act on modernizing the economy, we have reduced mark-ups by a factor of three.
In this way the rise in mass retail market prices has been averted.
Everyone knows, ladies and gentlemen, that for families, and particularly for the middle classes, housing is the highest expense. In the past 20 years, the contraction of the property market has made prices shoot up. So we have to go on building, providing more housing and increasing the transparency of this market. With 120,000 social housing units in 2009, never has a government done as much!
Never, never! Never either have we done as much to help first-time buyers purchase homes than with the interest-free loan (prêt à taux zéro renforcé) which will come in on 1 January.
We are going to strengthen our urban policy, rethink and reintegrate residents of problem districts into society with the support of the voluntary sector, establish the links in the Greater Paris (3) scheme and pursue our efforts on emergency shelter and access to housing. (…)
Ladies and gentlemen, employment is the key to social cohesion.
During the crisis, we brought in a huge number of exceptional measures with our social partners. This policy has borne fruit.
Since the beginning of the year our economy has begun creating jobs. We must today relaunch our employment policies and move forward with our flexisecurity. It’s our job to set the objectives, timetable and method, but I want to say that it’s up to the social partners to make proposals for them and define their conditions and tools.
What are these objectives? First of all to guarantee young people easier access to the job market. (…) We all know that the most effective solutions include apprenticeships and sandwich courses.
Because apprenticeships and sandwich courses enable 70% of those involved to get jobs. Today we have around 600,000 young people on sandwich courses. And we need to set ourselves the target of doubling this figure. (…)
At the beginning of 2011, we will be able together to decide the content of the social agenda for the next few months.
As well as dealing with employment, we have to safeguard and modernize our social protection system. (…) We will be launching a national dialogue on social protection (…).
Obviously, the immediate aim of this dialogue will be to deal with the issue of dependency. The cost is estimated at €22 billion and is expected to reach €30 billion in the next few years. The number of over 75s is expected to double in the next few decades. The first task will be to determine people’s real needs, see how the elderly can be enabled to stay in their own homes as long as possible. Then you will have to look at the different ways of funding this: compulsory or optional, collective or individual insurance? (…)
Ladies and gentlemen, since 2007 we have been modernizing the French model. Our hopes forbid us to mark time in the face of the difficulties, make allowances for our weaknesses and be unnecessarily divided. I reject any idea of being worn down or a need for a temporary halt [in the reforms]. Being worn down is the sickness of despondency and the temporary halt is the mark of the undecided.
For too many years we have been lulled by the certainty of our greatness. For too many years we have been sustained by the illusion that better growth would be enough to put things straight. Stranded on the shore, we have waited for the return of fair winds, trying to close the most perilous gaps.
Nicolas Sarkozy has proposed to France acceptance of the realities of a world which may not be as we want, but is ours. He has proposed rebuilding our national community around work. He has given priority to our universities, scientific strengths and our entrepreneurs. And I am convinced this is the right way. It’s the only one which is true to our heritage. The French know very well to what dogged effort they owe the social model which protects them, the culture which brings them together, the countryside they love and the Republic they cherish. They know what they owe past generations, those who fought for freedom and progress. (…)
We must be able to look our fellow citizens in the eye because we have been true to our commitments. We must persuade them that the courage to implement the reforms affords greater protection than the tranquillity of inaction. We must be more credible than our detractors and this demands rectitude, robustness and unity. (…)./.
(1) Conference bringing together the government, local authorities, trade unions, business and voluntary sectors to draw up a plan of action of concrete measures to tackle the environmental issue.
(2) This puts a limit on the total tax take from individuals.
(3) Project to link the city and its surrounding region with a green energy-efficient transport and building infrastructure.