Davos World Economic Forum
Davos, January 23, 2008
(…) France on the move! There’s no better description of what’s been happening in France over the past eight months. It’s the first time a French head of government has ever come to Davos for the World Economic Forum!
My presence today is a symbol: that of a France who wants to talk to everyone, a France who wants to participate in all the international fora, a France who wants to reoccupy her full place in the major debates on the future of the world economy – especially as there’s nothing certain about that future! (…)
I love my country. Like all the French, I can’t bear it being disparaged. When, in October 2006, I read the portrait "The Economist" painted of it, I promised to do the utmost to restore its image! What did this respected British magazine say? "Something seems very wrong with this country, (…) ’the sick man of Europe’ appears beset now by political and economic instability and by civil unrest and disorder. (…) Alarmist talk about France has become commonplace. Home-grown titles such as ’France in Freefall’, ’Gallic Illusions’ and ’France’s Malheur’ crowd the bookshelves. (…) ’Declinism’ has become a school of thought. Pessimism prevails." (…)
Well, the 2007 election has swept all that away. The French went en masse to the polls, despite the recent trend of lower and lower turnouts. They displayed a will for a break with the past and support for a clearly espoused reformist project. They signalled a change of mindset by choosing a team who refuted all the old ideas which rang false: no, business isn’t the enemy of the wage earner; no, work doesn’t alienate, it emancipates; no, globalization isn’t an option, it’s a fact!
PENSION REFORM/NEW MINDSET
The symbol of this new state of mind is our reform of the special pension schemes which every previous government had baulked at. For the first time in a long while, the government didn’t back down in the face of strikes, which lasted nine days. Its firmness went hand in hand with a constant dialogue with the trade unions.
And for the first time in a long while, nearly 70% of the French supported the reform, although severely inconvenienced by the public transport strike.
This change of mindset is also the result of a political choice: that of opening up [the government]. The binary clash, camp against camp, has wasted a lot of time for France. With Nicolas Sarkozy, the government is opening up to all the skills and leading figures on the left and in the centre of the political spectrum.
For a lot of observers France is also a country reluctant to see the economic reality for what it is.
That’s the old France.
Our country is conscious that it had stalled and it no longer shies away from the facts. We have roughly 1% less growth and 1% more unemployment than the best European countries, and this has long been so. With Nicolas Sarkozy, we’ve started waking up the French economy by enhancing the value of work, merit and risk-taking. (…)
We’re reforming to free up entrepreneurs and inject competition everywhere necessary to stimulate creativity and bring down prices, to the benefit of consumers.
We are preparing a complete overhaul of our fiscal system, and particularly business taxes, to make it both less complicated and less burdensome. A commission chaired by Jacques Attali on which sat several foreign experts like Mario Monti, has just made 316 proposals to remove the brakes on our growth, and in the next few months, most of them will be implemented.
LABOUR MARKET REFORM
Another recurrent cliché: France is seemingly the country where "people go on strike before negotiating".
Things are changing, as has been demonstrated by the recent compromise worked out between employers and trade unions on the labour market reform. (…)
The two sides of industry have shouldered their responsibilities. (…) People now talk about flexibility, when barely a year ago the word was virtually taboo! (…) My ambition is that, thanks to the revitalization of the social dialogue, France will fully adopt the culture of dialogue and compromise, and this at the level closest to entrepreneurs and wage-earners: i.e. at company level.
These reforms all have one common goal: to wipe out another image we want to free ourselves from, that of the country where mass unemployment is seemingly inevitable.
That inevitability belongs to yesterday’s France. Today, we have a historically low unemployment rate, since it’s at the 1982 level: 7.9%. Despite this achievement, we are still ranked 24th among European countries.
5% unemployment in 2012: that’s our goal! To provide better support for jobseekers, we have a launched a process of merging benefit offices with job centres.
"Work must pay more than benefits!" That’s something we’ve heard in all the symposia of the past 15 years in France. We’ve taken some action by creating the RSA (1) and the fight against benefit fraud. Finally, we want to increase the elderly employment rate, which in France is extremely low and is one of the causes of our difficulties, both in terms of growth and labour market shortages. Our strategy is starting to deliver results: over the past four quarters, France has created 312,000 jobs in the private sector, with 321,000 business start-ups in 2007, 18% up on 2006.
If you were asked to cite one country where public spending is insufficiently rationalized, you’d be tempted to answer "France". (…)
We want to put an end to this spiral. Our objective is simple: restore balance to public finances by the end of Nicolas Sarkozy’s five-year term.
And for this, we have decided to freeze public spending and central government contributions to local authorities.
We have set in train a radical reform of our public service agencies, by abolishing those which have lost their usefulness, merging those doing the same job, and carrying out a cost/benefit analysis of all our public policies. Ever since France has had a modern State structure, after the Revolution, it’s true to say that the number of her civil servants has constantly risen.
In 2007, we made a historic change of course by abolishing one civil service post for every two retirees, and the same will apply for the next four years.
Improving public spending is a long-term project. I shall pursue it unflinchingly and, at the end of the five-year term, our public finances will be in order. (…)
We’re moving to an intelligence-based economy.
Straightaway, we’ve launched the reform of our universities to give them greater management flexibility.
We have significantly increased the budget for higher-education and research. We’re going to boost it by 10% every year for the next five years, even when public spending in other areas is being stabilized or cut.
We have decided to triple tax incentives for research. I can tell you that if you set up in France, you have a tax credit on profits of 50% of all your R&D costs for the first two years, then 30% thereafter. There are also some specific incentives on top of this.
To improve French companies’ productivity, we’re accelerating our investment in strategic technology sectors. Support for SMEs has been completely reformed to help businesses with a very strong growth potential to grow. And we’ve also created a very special tax status for the jeunes entreprises innovantes [France’s equivalent of the Young Innovative Company (YIC)]: the starting-up stage is toughest; this is what assistance must be concentrated on. (…)
It’s sometimes said that, when it comes to market opening, France is an overcautious country which views globalization negatively.
It’s an optical illusion! We’re the fifth-largest exporter of goods (and the third for services), the world’s number one tourist destination and third for inward investment.
In reality, the French aren’t afraid of globalization, but they want to be better prepared for it in order to be active players in it and not just be affected by it.
Like you, we think that market opening is the key to prosperity and development. But this doesn’t preclude speaking out when competitiveness is distorted. With our European partners, we want to do more to overcome the obstacles to trade and investment, fight trade practices which contravene WTO rules and the infringement of intellectual property rights.
Nor must we ignore the immense challenges generated by globalization, particularly on the social and environmental fronts.
We must develop policies for providing support for the most vulnerable, specially adapted government policies like the Trade Adjustment Act in the United States or the European Globalization Adjustment Fund.
FINANCIAL MARKETS/IFI/MULTILATERAL INSTITUTIONS
Recent developments daily remind us that the stability of the financial markets is vital for our economies. It hasn’t been secured for good! With our European partners, our G8 allies, the international financial institutions, we have to increase the markets’ transparency and ensure that all players in the financial markets act extremely responsibly.
Christine Lagarde has got her European counterparts to agree to us looking at the role of the rating agencies and strengthening the role of the IMF.
We think too that it’s time to improve cooperation between the bodies supervising the European financial markets. This is the message President Sarkozy will bring to the Europeans’ G8 meeting on 29 January.
Here in Davos, we aren’t just observers of a globalization endowed with every virtue. Our world needs regulation and balance.
For this we must work on reforming the multilateral institutions.
In particular, France will do her utmost to get the G8 gradually turned into a G13 by bringing in China, Brazil, India, Mexico and South Africa. And she will go on fighting to get the inclusion of Germany, Japan, Brazil and India as permanent members of the United Nations Security Council, with a fair representation of the African continent.
The World Bank and IMF must be rethought. Dominique Strauss-Kahn and Robert Zoellick have a brief to strengthen the developing countries’ voice in return for their greater acceptance of collective disciplines. (…)./.
(1) revenu de solidarité active – inclusion income support comparable to the US EITC (earned income tax credit) and the British WFTC (working families’ tax credit)