The European Commission put the seal on an uncomfortable week for French President Francois Hollande on Friday, adding its voice to a chorus of criticism of his reforms for falling short of turning the economy around. Though it gave a guarded blessing to France's 2014 budget plans, the EU's executive arm deemed Hollande's programme to be only "partly adequate" for getting a grip on public finances.
As his poll ratings have fallen to historic lows below 20 percent, Hollande has resisted calls from ratings agencies and EU partners for strong action to make the euro zone's second-biggest economy more competitive and less dependent on state spending. Hollande's government defends its overhaul of pensions, labour market and taxation as unprecedented in modern France, but Standard and Poor's, the Organisation for Economic Co-operation and Development and now the Commission have all said in the past week that the reforms are insufficient.
The Commission earlier this year gave France extra time to cut its public deficit to an EU threshold of 3 percent of output on the strict understanding that it makes progress on reforms. "These will be insufficient to address fiscal and structural imbalances," it said in the draft opinion of the French reform effort which the Commission will send to France's EU's partners for official adoption.
The Commission said the pension reform did not go far enough to bring the retirement system's accounts to balance in 2020 as planned because it did not tackle public sector pensions and was based on optimistic growth assumptions. "Schemes for state government officials and employees working in a number of state-controlled companies (are) still expected to run to significant deficits by that horizon," it noted.
It also said a spending review under way had so far delivered "only limited outcomes" and questioned whether it would generate big savings necessary for bringing down one of the highest levels of government expenditure in the world, currently around 57 percent of output. The Commission also lamented a lack of detail on plans to rein in healthcare spending and said a suspension of a tax on heavy trucks in the face of violent protests went against the government's intention of introducing more environment-friendly levies. It raised doubts that a corporate tax rebate scheme aimed at reducing the high cost of labour in France would create many jobs and boost investment as much as hoped by the government.
"Finally, the measures underpinning the government's commitment to reduce the cost of labour need to be further specified," it said of efforts by Hollande's government to remove what many analysts see as an obstacle to hiring. Defending the government's record, Finance Minister Pierre Moscovici told journalists: "We will continue with reforms for competitiveness but we will do it in a way that ensures that they are socially acceptable." However, bolder, unpopular reforms could come at a high cost for Hollande, with one poll showing his approval ratings this week at only 15 percent, a post-war low for a French president.
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