French Leader’s Policy Proposals Seek Centrist Path
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Version 0 of 1. PARIS — President François Hollande startled the usually staid world of European economic policy with proposals to take France in a centrist direction with tax cuts for companies, reductions in public spending and a business-friendly tone. Mr. Hollande detailed his economic plans at a news conference on Tuesday attended by hundreds of journalists, many of them more interested in his answers to questions about his affair with an actress than his economic policies. He described his new approach as a “responsibility pact” between the French government and business. On Wednesday, the proposals drew accolades and encouragement from European Union leaders and German officials, who have long pushed for France to make structural changes in its economy. Mr. Hollande drew cautious support from French business leaders. But France’s far-left and far-right parties expressed dismay, saying that the nation needed a generous government safety net. For those on the left, who have pushed to have generous social programs funded by hefty taxes, Mr. Hollande appeared to be relinquishing his position as Europe’s Socialist standard-bearer and strongest opponent of Chancellor Angela Merkel of Germany, whose philosophy of austerity has perhaps strengthened Germany but has yet to bring financial stability to poorer euro zone countries like Greece. Mr. Hollande, who as a candidate took a stand against European austerity policies and as president has resisted calls for deep public spending cuts, strongly rejected the accusation that he had become a free marketer, saying that he “had not been won over by liberalism,” a reference to economic liberalism, which in France means a market approach. “I am a social democrat,” he declared. And his proposals, Mr. Hollande said, “are not a shift” in views, but “an acceleration on the same path.” Germany’s foreign minister, its president and the European Union, all praised Mr. Hollande’s proposals, cautioning, however, that they could be hard to deliver on for political reasons. “What the French president presented yesterday is, firstly, courageous,” said Frank-Walter Steinmeier, the foreign minister of Germany. “That seems to me to be the right way, not only for France, but it can also be a contribution that brings Europe as a whole” into a stronger position as it strives to emerge from an economic crisis, Mr. Steinmeier said. But he cautioned that similar changes had taken a long time to come to fruition in Germany because of political obstacles. Mr. Hollande’s proposals include a cut in payroll taxes that he said would reduce the costs of business and independent workers by 30 billion euros ($41 billion) by eliminating the amount paid by companies and independent workers for the family allocation, a tax that finances an allowance for each child after the first as well as an array of other family benefits. The family allocation and other benefits are core elements of France’s social programs and have been credited with contributing to it having one of the highest birthrates in Europe. The allowance is income blind, going to all French families. Mr. Hollande also said he would cut spending by €50 billion but did not specify where. Economic experts, while gratified that Mr. Hollande finally seemed willing to wrestle with France’s intractable unemployment, which has hovered between about 10 and 11 percent for close to three years, and an economy that is barely growing, remained skeptical that he would be able to persuade his party to support the changes. The experts also said that while it is easy to talk about cutting tax revenues, the president has yet to explain what programs or benefits he would reduce or eliminate to pay for the cuts — not to mention how difficult it would be to win political support for such cuts. “Better late than never,” said Daniel Gros, director of the Center for European Policy Studies, an independent organization in Brussels. “But I must say its implementation is the difficult part,” Mr. Gros said, adding that even with the proposed cuts, government spending in France would remain at over 50 percent — it is now at 57 percent — of GDP, making it the second highest in Europe. That is still “more than the economy can bear if it wants to remain competitive,” he said. He questioned whether Mr. Hollande’s Socialist Party would go along with the changes, but reflected that he might be more able to reduce social spending than a conservative leader. “Sometimes, as in Germany, the left can better do these social policy reforms than right,” Mr. Gros said. It was Ms. Merkel’s predecessor, Gerhard Schröder, who set the course for reducing government spending and strengthening the government’s relationship with business. Although the international media from Tuesday’s news conference dealt with Mr. Hollande’s affair with an actress and the hospitalization of his companion, Valérie Trierweiler, who has been serving as the first lady, those in the French news media on Wednesday were focused on his economic plans, generally supportive, tempered with concern about what they would mean for France’s social safety net. “He is shaking up the Socialist Party,” said Pierre-Alain Furbury, a journalist who covers economic issues for Les Echos, a business newspaper. Reiterating that Mr. Hollande’s plans were a real departure from his policies and his tone during the presidential campaign, when he embraced a 75 percent tax on the rich and criticized big business, Mr. Furbury said that this could be “the most important speech in his five years as president,” and even change the positions embraced by his party. |