Maybe it's because the French government is breathing down its neck under pressure from the International Monetary Fund and the rating agencies. Maybe it's because there are persistent rumors on the markets that Paris will be the next target for speculators. The fact is that yesterday Louis Gallois, a former public manager, hired by the left, which has just come to power, to identify with a group of experts how to revive the competitiveness of Made in France, presented his report. And today, in record time, the government of Jean-Marc Ayrault, under the impetus of François Hollande, has resumed the bulk of the proposed measures, even though they have already been immediately criticized by many exponents of the Socialist Party.
Among the measures recommended by Gallois and company and immediately adopted by Paris, the decision to reserve a share of public tenders for small and medium-sized enterprises (above all the most innovative ones), to guarantee all companies fiscal stability for five years (without changes abrupt changes in rates and rules) and to launch precise aids to companies that export (the weakness of exports is one of the major thorns in the side of the French economy). But it is useless to get around it: most economists, to explain the deindustrialization of France (because that is what it is about, factories that have been closing for about ten years and relocating), point the finger at the excessive cost of labour.
The report indicated the way forward to cut social security contributions for an annual total of 30 billion euros (one third to be subtracted from those paid by workers, the rest from contributions paid by entrepreneurs). Today Ayrault has started by launching 20 billion of relief in the form of tax credits for the benefit of companies. There is no direct action on social security contributions but the reduction of labor costs (an estimated minus 6%) for entrepreneurs is done. Everything will be operational from 2014. Ten billion must come from new taxes (especially in the so-called environmental taxation). The other ten billion will come from an increase in VAT (from 19,6 to 20% for the maximum rate, from 7 to 10% for the intermediate rate, while that on basic necessities will drop from 5,5 to 5 %). Many of the President's party mates didn't like this last measure at all.
In fact, Hollande had to renege on one of the promises he made during the presidential campaign. That in the five years of his mandate he would never have revised the VAT upwards. He had reiterated it at the end of September. It should be underlined: upon coming to power, the new president and the new Executive had decided to block one of the latest measures, that of the "social VAT", taken by Nicolas Sarkozy, which provided for an increase in VAT to cover a part of the expenses of entrepreneurs relating to social contributions. Now, however, the socialists in power have done practically the same. Because you have to hurry. The Gallois report provides some disturbing data on Made in France.
Industry's contribution to GDP, the gross domestic product, fell from 18% in 2000 to 12,5% last year. In the meantime the trade balance (without considering energy) has gone from a surplus of 25 billion to a deficit of 25 billion. Exporting companies have dropped from 107.500 in 2002 to 95 in 2011, now half that of Germany and even that of Italy. Meanwhile, in 2010 (these are the latest comparative data available) the average hourly wage in France amounted to 34,17 euros. More than in Italy (25,2) and than in Spain (21,7). But now even beyond the level of rich and competitive Germany (33,1).
