France's president has foreshadowed a five-year "pact for competitiveness" to revive industry. Francois Hollande emerged from talks with key international institutions on Monday, hinting at burdens all around.
Hollande said all indicators show that France is "not in the best of situations." The Socialist president also called for more market restraints, saying the world needs "mechanisms, regulation and action."
Hollande had just met in Paris with the visiting heads of the World Bank, International Monetary Fund, World Trade Organization, International Labour Organization and the Organization for Economic Co-operation and Development.
Hollande said his proposed pact to boost French industry would place demands on "all the spheres of competitiveness" and would be equally transparent for companies, taxpayers and investors.
He said the pact would be unveiled in November, but not before the former head of the EADS aerospace group, Louis Gallois, presents a set of economic recommendations.
'Shock therapy' rumored
French media say that Gallois' report will conclude that France needs "shock therapy" through a payroll tax cut worth 30-50 billion euros ($40-65 billion).
Hollande and his finance minister, Pierre Moscovici, have argued for a more gradual approach so as not to further dampen consumer spending at a time of downturn.
The president is grappling to uphold pledges made before his election in May to create jobs and spur growth while applying austerity measures to plug holes in public finances.
As Hollande went into Monday's talks, French business leaders urged his government to slash 30 billion euros in the portion of welfare charges paid by employers and to slash public spending by 60 billion euros over five years.
Complaint from French business
In an open letter published in the Journal du Dimanche weekly, Afep, the confederation representing some 90 of France's top companies, wrote that recent increases in taxes and charges had "reached the limit of what is tolerable."
"Our [profit] margins are at record lows," Afep said. "For companies, the working costs must be reduced by at least 30 billion euros over two years by cutting the employers' portion of welfare charges."
Moscovici rejected huge tax cuts for firms, saying offset measures such as an increase in value-added tax would in turn suck from "the purchasing power of the French" who were "clients" of these firms.
Merkel rejects debt restructuring
Ahead of a visit to Berlin on Tuesday by the heads of the world economic institutions, German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble have again rejected further debt relief for Greece.
"We cannot just guarantee loans to a creditor who has not paid back his debts," said Steffen Seibert, a spokesman for the German government. "We would be tying our hands with such a measure."
Greece is said to need the next 31.5-billion-euro tranche of the bailout by the middle of November if it is to avoid slipping into insolvency.
ipj/mkg (AFP, Reuter, dpa)