2015 set to be turning point for the French economy - Minister
Economic issues/attractiveness/European Union – Interview given by M. Emmanuel Macron, Minister of the Economy, Industry and the Digital Sector, to the daily newspaper Les Echos¹
Paris, 7 January 2015
Q. – François Hollande estimates that, to bring down unemployment, a growth rate above 1% is needed. Will that be the case this year?
THE MINISTER – The government has predicted a rate of 1%, and it stands by this forecast. However, I think 2015 should be the year of European renewal and a turning point for the French economy, as circumstances have changed. This is due to external factors, such as the sharp drop in the value of the euro against the dollar, the fall in oil prices, and low interest rates. It is also due to domestic factors, namely government action – the ramp-up of the Competitiveness and Employment Tax Credit, which will account for €17 billion in 2015, and the entry into force of the first phase of the Responsibility Pact, in which various contributions will be cut back.
Q. – Can you put a figure to these factors?
THE MINISTER – Employers’ contributions for minimum-wage employees will be cut in half, i.e. €140 per month less in contributions. All of these factors together will restore several percentage points of margin to businesses. In terms of competitiveness, the initial result is that average hourly labour costs in France’s industrial sector have fallen below those in Germany. Our challenge in 2015 will be to take advantage of this new macroeconomic situation to fully rebuild businesses’ confidence. Objectively, all of the factors are there to get hiring and investment back on track. To effectively meet our challenge, we need to simultaneously accomplish three things over the next six months. We have to underpin and explain the measures already under way. We have to step up macroeconomic reforms to modernize our economy and to show entrepreneurs, investors and our partners that we are making progress. And we must move European macroeconomic policy in a different direction in order to restart demand within the Euro Area. To do so, we need smarter coordination between fiscal policies, commitment by Germany to a genuine stimulus policy, and a bolder European investment policy.
Q. – With respect to the Responsibility Pact, the trade unions are not satisfied with the number and the content of the agreements proposed by management.
THE MINISTER – Signatures of sector agreements picked up late in the year, but we must go much further. The scope of the measures that we are introducing to support businesses is unprecedented throughout the Fifth Republic. And yet, the French economy’s most serious handicap is insufficient corporate investment, although all of the conditions are now in place for businesses to invest. Our course has been set, and there is ample tax and legal certainty. This is the moment to invest, particularly in France. Major French firms should not forget that they are French – they certainly don’t forget it when they run into problems. We have done our part; now it’s up to our business leaders to do theirs.
Q. – You talk about the need to move European economic policy in a different direction, although it is less restrictive than in the past.
THE MINISTER – France has done what it needed to do with respect to reforms and fiscal consolidation. No one can accuse us of sitting on our hands over these past few months. I’m sorry to say, however, that Europe has not done its part. Stimulus policies are insufficient at European level, at a time when Euro Area recovery is still tentative.
Q. – What sort of message will France have for Germany at Sunday’s meeting between François Hollande and Angela Merkel?
THE MINISTER – We hope to convince our German partner that France and Germany must jointly do much more to get Europe back on track. Countries undergoing austerity programmes are, democratically speaking, exhausted. We see this in Greece. It is up to the Greek people to duly elect their representatives, who will have to honour their country’s commitments.
Q. – The prospect of a Greek exit seems less and less like a taboo topic in Germany…
THE MINISTER – Greece’s place is in the Euro Area, regardless of the government that comes to power.
Q. – Will Greece’s debt need to be restructured once more?
THE MINISTER – Greek debt was already restructured in 2011. As part of this, the Troika introduced a support plan that can be modified, under the express condition that Greece continues to carry out the necessary economic and political reforms.
Q. – Turning to another topical issue, is a Germany prepared to support quantitative easing by the ECB?
THE MINISTER – The ECB is independent and does everything required to fulfil its mandate. In addition to the fiscal consolidation policies introduced, Euro Area monetary policy has been much less accommodative than in the US in the last three years. The ECB must now be allowed to take proactive steps to anchor inflation expectations and support the pro-growth reforms. Now is the time to step up a gear, for economic as well as political reasons. Populism obviously feeds on desperation. The generation that has entered the job market in the last few years has been faced with pervasive unemployment and runs the risk of being left out in the cold for good.
Q. – France is not in the best position to lecture others given that its deficit will not fall below 3% before 2017...
THE MINISTER – It’s not about lecturing, but rather about making joint decisions that will determine Europe’s future. Besides, France is being true to its commitment to reduce public spending, and that is fundamental. We are not talking about going further, but saying that the €50 billion in savings will not necessarily be the end of the story: we must set ourselves the target of reducing public spending as a percentage of GDP even further beyond 2017. We could set a target of 50%, for example, which is equivalent to the level of public spending 10 years ago, and we weren’t necessarily any worse off at that time; the previous government is responsible for the increase. Germany for its part must raise its investment levels considerably. This is an urgent requirement, just as pushing through reforms is urgent for France.
Q. – Is the Juncker plan taking too long to take shape?
THE MINISTER – It’s already a key step and represents very significant progress. But it can be improved upon: for example, resources can be boosted through a European borrowing capacity. As far as jobs are concerned, low-interest bank loans are not necessarily a priority as they already exist. The plan should focus on supporting investment through the greater acquisition of capital stakes in SMEs. It should also finance expenditure on research or infrastructure by providing grants based on a genuine European investment plan along the same lines as France’s Invest for the Future Programme.
Q. – Why would Germany change tack today in all of these areas?
THE MINISTER – Germany is already doing so. Look at the recently-introduced minimum wage and investment policies. It will make even more changes if it has enough confidence to do so and realises that we face major challenges in the medium term. France must also show that it is willing to take bold steps.
Q. – Your bill will soon be before Parliament. According to Cécile Duflot, it represents “a giant step backwards”. What would you say in response?
THE MINISTER – Cécile Duflot reminds me of a Woody Allen line: “The answer’s no. What was the question? ” If she reads the bill, she will realise that her fears are unfounded. Coach travel is more environmentally friendly than car travel. As far as Sunday trading is concerned, there are currently 600 tourist areas in France where no statutory employee compensation exists. This bill fixes that, making it compulsory everywhere. The deadlines set for key projects can be closely monitored and regulated without doing any harm to the environment. Taking longer to do something does not necessarily mean it is done any better.
Q. – You have held in-depth talks with members of the regulated professions, but they are still fighting the reforms...
THE MINISTER – We will hold parliamentary discussions with lawyers on the two points that are stumbling blocks, namely territorial postulation rights and corporate lawyer status. We’ll reach an agreement. Relations with the bailiffs have improved somewhat. As regards notaries, the text is relatively balanced: for example, we will not change the rules governing authenticated instruments or the freedom to set up anywhere. We are taking a transparent approach to fees and maintaining the equalization principle. I would like notaries to agree that reforms are necessary in principle. In 2009, they themselves pledged to create more jobs and open more offices, but they haven’t done so. And that’s because the current system’s incumbents have nothing to gain from making changes to it. I’m prepared to take another look at the technical aspects outlined in the bill, but I’m not prepared to perpetuate the status quo. Who would argue in favour of maintaining rules that date back to Louis XVIII?
Q. – How open are you to discussions regarding Sunday trading?
THE MINISTER – I’m not going to start bartering about the number of Sunday opening days that can be authorised. The first goal of the bill is to allow Sunday openings in places where we are sure jobs will be created and business activity generated with no harmful side effects, or in places where management and labour representatives have held talks and reached an agreement regarding employee compensation, i.e. in the main international tourist areas and railway stations. The second goal is to give mayors greater freedom. Any debate must centre on the degree of latitude that can be allowed to ensure that the most suitable measures are taken to maintain and encourage local shops in our town centres to flourish.
Q. – Why are you being so cautious about the impact of the future act on growth and jobs?
THE MINISTER – Any attempt to come up with five or 10-year forecasts would be meaningless. That said, I’m utterly convinced that the future act will enable tens of thousands of jobs to be created in the next 18 months, especially by deregulating certain sectors (coach transport, closed professions), and by authorizing Sunday trading. What’s more, in the coming years, the initiatives concerning entrepreneurs and labour law, with the overhaul of the industrial tribunal system, will have widespread indirect consequences. This, together with steps to reform industrial relations, will remove a large number of obstacles for SMEs, will be central to restoring confidence and, thereby, encourage corporate investment. The bill is proof positive that France is once again a contender and that it is undertaking the required reforms.
Q. – Opposition parties have criticised you for not addressing civil service reform. How would you answer this criticism?
THE MINISTER – The opposition needs to stop embodying conservatism. Right-wing moralism has to stop making civil servants scapegoats. One example of the major efforts being made by the civil service is the fact that the pay scale has been frozen since 2010.
Q. – Joint negotiations on industrial relations are stalling. What does the administrative arm of the government intend to do about this?
THE MINISTER – The negotiations must lead to a bold agreement able to be quickly written into law. This can be achieved by compromises from both sides.
Q. – Will the ban on cloth cap pension schemes be included in the Bill?
THE MINISTER – The Charpin report’s recommendations are due any day now. I feel very strongly that all supplementary pension schemes should be authorized provided they are based on employee contributions. This is not the case for some cloth cap plans which just offer a perpetuity which represents deferred income for the beneficiary who has never paid into the scheme. This will no longer be allowed. I’m in favour of a system that rewards performance and risk-taking rather than promoting annuities.
Q. – Will the reforms stop once the Macron bill has been adopted?
THE MINISTER – Let’s take it step by step. The Growth and Economic Activity Bill is only the catalyst for the reform programme and there’s still a lot of ground to cover. I intend to table further proposals once the Bill has been adopted. France needs to go even further.
Q. – You’re attending the Consumer Electronics Show (CES) in Las Vegas. Has French-bashing fallen out of fashion?
THE MINISTER – That’s up to us to decide, as the main perpetrators of French-bashing are certain elites in France. I’m looking to convince foreign businesses to invest in France by proving that things are on the move. I’m also here to support French start-ups, under the collective banner of “La French Tech”. Start-ups are vital for our economic recovery and they are thriving in France, with Paris having becoming a real hub. What’s missing is funding to help them expand once they’ve been set up.
Q. – What do you suggest?
THE MINISTER – We need to bolster equity investment options and foster mergers and acquisitions by major groups. I’d like to see the first IPOs on the EnterNext market this year. We also need success stories with their strong knock-on effect. We’ll carry on improving labour and tax arrangements through the measures set out in the Growth and Economic Activity Bill concerning, for example, bonus shares. We’ll also be setting up a fund with the Public Investment Bank for joint investments by business angels. Entrepreneurs who reinvest in France will be playing a vital role. The Internet economy is packed with superstars and young French people must be instilled with the desire to become billionaires. I don’t denounce the CAC 40 companies as they shape the French economy and our current startups must foreshadow tomorrow’s CAC 40.
Q. – What are you going to do about the 34 plans of the “New Face of Industry in France” programme initiated by Arnaud Montebourg?
THE MINISTER – My teams are supporting the continued rollout of the 34 plans by the relevant industries. I’ll carry on reviewing the plans during this first quarter.
Once I have discussed matters with project leaders, I’d like to trim the plans down to around a dozen. I want consistent projects with more global scope and significant involvement from SMEs. Resources won’t be cut but actions will be better focused to make them more effective.
Q. – As the 75% tax rate is being phased out, what conclusions can you draw from this measure?
THE MINISTER – This was a political message sent out during the 2012 presidential campaign. It was only ever intended to be in force for two years. I realize that the issue of very high salaries is a sensitive one for French citizens but I’d rather see talented risk-taking individuals be very well paid rather than have an economy of trust funders that withers away. We need to hammer home the fact that success is one of France’s values and that success and emancipation through work are even thoroughly left-wing values.
¹Source of English translation: French Ministry of the Economy, Industry and the Digital Sector and Ministry of Finance and Public Accounts.