OECD urges France to become a leaner state | Business| Economy and finance news from a German perspective | DW | 19.03.2013
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OECD urges France to become a leaner state

The Organization for Economic Cooperation and Development (OECD) has called on France to restructure its tax system in order to fuel growth. It also urged Paris to reduce the size of its public sector.

The OECD on Tuesday trimmed its forecast for France, saying it expected the eurozone's second-largest economy to grow by just 0.1 percent this year instead of the 0.3 percent it had predicted earlier.

The umbrella organization for the world's most industrialized nations said France's public deficit would come in at 3.5 percent, thus contradicting assessments by the government in Paris which had pledged to return to the 3-percent EU deficit ceiling in 2013.

"Deficit reduction efforts must continue as planned while letting automatic stabilizers operate fully," the report said.

Leaner state recommended

But while urging Paris to keep spending at bay, the OECD recommended a shift in taxes away from levies on businesses and labor with a view to boosting competitiveness and growth.

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The organization criticized France's oversized public sector, with almost 23 percent of all workers in the country being employed there. Among other things, the OECD suggested that France administratively unite the smallest of the nation's 36,700 communities to reduce costs.

In a first reaction to the report, French Finance Minister Pierre Moscovici agreed that action was required to bring down debt levels which the OECD said might amount to over 96 percent of gross domestic product (GDP) by 2014. But he added that for the time being he considered it to be most important to raise revenues by taxing large companies and the richest in the country instead of implementing excessive spending cuts.

hg/mz (Reuters, AFP)

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