After a year in office, the battle lines are finally being drawn in the struggle to reshape France's underperforming economy that will be the defining issue of François Hollande's five-year presidential term.
On May 29, the European Commission – the EU’s executive arm – will set out structural reforms that are, in effect, the condition for its earlier decision to allow France an extra two years to meet the target of reducing its budget deficit below 3 per cent of output.
There will doubtless be some disagreement over the extent and scale of the reforms. Mr Hollande has publicly declared that he will make changes at his own pace, and because they are in the interests of France, “not because Brussels demands it”.
France’s business leaders, frustrated by what they regard as a wasted year dominated by rising taxes, falling profit margins and stalled growth, are among those urging Mr Hollande to go further and faster. But in what is shaping up to be a decisive period, Mr Hollande is committed over the rest of this year to detailing an unprecedented €60 billion of cuts in France’s bloated public spending bill to be spread over the rest of his term. Some of the cuts will come from paring the “millefeuille” of France’s 37,000 regional authorities and local councils – the national power base of the Socialist party.
Mr Hollande promises an overhaul of the pension system that he says will require people to work for longer. A previous reform by his centre-right predecessor Nicolas Sarkozy, which raised the minimum retirement age to 62, provoked weeks of angry protests. France’s generous unemployment benefit system is also set for a shake-up and the government is planning cuts in the equally generous system of universal family welfare payments.
© Financial Times
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