Barroso calls France's 2014 budget 'satisfactory'; OECD urges competitiveness

11 November 2013

Barroso has called France's 2014 budget "satisfactory", but has said the eurozone's second-largest economy still needs to do more to reduce unemployment. Meanwhile, the OECD has urged France to reinforce competitiveness.

The European Commission has urged Paris to make bolder reforms in return for granting it an extra two years to bring its public deficit within the EU target of 3 per cent of output. Although France says it plans to meet that target by 2015, the Commission has forecast the French deficit to be 3.7 per cent of output in 2015.

"This is a prediction, if other measures aren't proposed and taken", Barroso said. "We think this (forecast) could change. France has to do more to reduce its problem of unemployment, which is the biggest problem in many countries."

France has already been stripped of its top-grade triple-A status by all three major rating agencies, but S&P was the first to downgrade it for a second time, warning that economic reforms of the past year were not sufficient to lift growth.

The Commission has said more needs to be done to revive growth beyond a modest reform enacted by Hollande's government to add flexibility to the labour market and a review of its generous pension system. "I am confident France will face its difficulties", Barroso said. "I think there has been some progress on certain reforms, not only the labour market. What I have to do ... is to encourage them more."

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OECD: Reinforcing competitiveness is key to boosting jobs and growth

Improving France’s competitiveness is essential to boost the economic growth needed to create jobs and allow citizens and businesses to develop their full potential, according to a new OECD report, entitled "France: Redresser la competitivité".

It identifies a number of weaknesses in the economy where reforms should be a priority. A key focus is the need to ensure that the country’s education system and professional training infrastructure provide people with the right skills to succeed in a globalised economy. 

Key points:

• Reinforce research and innovation, an area that the report says is weak and imbalanced in France. Research and development, particularly among small and medium-sized companies, are insufficient and links between private and public research tenuous.
• Improve public sector efficiency. Reduce the regulatory burden, simplify the way decentralised authorities are organised and rationalise the overlapping «millefeuille » of agencies, says the report. An approach to public service based on performance needs to be developed.
• Reform taxes. France’s relatively high levels of labour taxation and minimum wages undermine the employability of low-skilled workers.
• Reform the labour market. High unemployment among youths and the over 55s combined with the problem of long-term joblessness are major challenges.
• Improve the way the housing market functions. The report argues that the rise in property prices undermines France’s export performance as it attracts capital and labour resources away from more productive sectors of the economy.

Press release, 14.11.13

Full report (in French)