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IMF urges France to expand controversial labor reforms

France’s economy is recovering at a pace insufficient to combat high unemployment - and the government may need to extend its already unpopular labor reforms, the International Monetary Fund (IMF) has warned.

The IMF called President Francois Hollande’s reforms - which ease firing and hiring - "necessary" steps to cut down the 10 percent unemployment in the eurozone’s second biggest economy.

In its annual review of the French economy released Tuesday, the crisis lender forecast growth for France of 1.5 percent, higher than its previous 1.1 percent outlook. But the institution also said that this growth wasn’t fast enough.

"The economy is recovering, but not at a pace that will bring about the needed reduction in France’s high level of unemployment and public debt," the IMF said.

But France’s planned labor market reforms - controversially forced through the National Assembly without a vote - have incensed French labor unions, which have carried out port and rail strikes, and also blockaded refineries around the country, choking off supply to petrol stations.

And they may just get angrier if the reforms are expanded in accordance with the IMF’s recommendations. The Fund urged France to tackle what it deemed to be key issues, like a "sizeable" labor tax, the proliferation of centralized labor agreements as opposed to company-level deals, a "relatively high minimum wage" and protracted legal cases over dismissals.

The IMF especially recommended the tightening of rules governing the receipt of unemployment benefits, saying that people have to pay contributions for a longer period of time before qualifying for the dole. The Fund also proposed a two-year maximum for receiving benefits.

Apart from expanding the unloved labor market reforms, the IMF also warned France that it would have to do more to curb its public deficit. It expects to see France’s public debt peak at 98 percent of gross domestic product in 2017, and only decline slowly afterward.

To rein in spending, the IMF proposed trimming France’s large civil service, as well as raising the retirement age and cutting down on health expenditure.

jd/uhe (Reuters, AFP)

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