France: Is there a plan B? - Natixis

Patrick Artus, Research Analyst at Natixis, suggests that the logic underpinning France’s economic policy is quite clear as France’s main problem is its low employment rate (which explains its inequality before redistribution, its low potential GDP and its fiscal deficits).

Key Quotes

“A comparison between OECD countries shows that an improvement in the employment rate requires an increase in labour force and youth skills and a reduction in corporate social contributions.”

“The policies being carried out in France (reform of training, apprenticeships, education; reduction in corporate charges; probably also tax cuts to reduce companies’ cost of capital) therefore point in the right direction. If they succeed, they will self-amplify, as the increase in the employment rate will make it possible to reduce corporate social contributions.”

“But it is always difficult to predict the effects of reforms. If they fail or have only a small effect on the employment rate and potential growth, France will face low growth and a deterioration in public finances in the future. It is not clear what alternative economic policy plan could then be put in place.”