The Economist this week has a 14-page special report this week in its print edition that focuses on France, from its economy to politics, under the central theme of how economic structural reform is necessary in order to avoid a “time bomb” going off at the heart of the Eurozone. You can access the Nov. 17, 2012 print edition contents here. The leader article introducing the special report is here, and the special report link can be found at the table of contents site under “Special report: France” (there are 8 articles).
I’m delving into all this right now and encourage you to do the same. Even if you don’t agree with the magazine’s analysis, it is a highly-regarded publication for a reason: for asking important questions.
This is the not the first time the British news magazine has waxed poetic about France’s economic woes and potential for growth. Indeed, French economic and business paper Les Echos puts past covers and stories into perspective (in French).
What do you think are France’s biggest problems and do you think Hollande and Ayrault’s government can solve them?
As you know, I write for Bonjour Paris, and this week I have an article covering many subjects. You can read it here.
French financial daily La Tribune reports that the Internet sector contributed to 3.7% of French GDP last year, worth 72 billion euros. It cites a report by McKinsey which states that the sector has created a net total of 700,000 jobs in France in the past 15 years.
At 14% annual growth, the sector should reach 5.5% of GDP by 2015, or 129 billion euros, creating another 450,000 jobs in France.
Moreover, companies that invest in new technologies (web sites, intranets…) have reaped the awards: “for every euro spent, they generated 2 euros in operating margins”, according to McKinsey.
The study was presented by Eric Besson, the French Minister for Industry, Energy and Digital Economy (Ministre de l’Industrie et du numérique) and co-fnanced by Google, which has participated in similar studies in the UK.
France is unfortunately known for its high taxes. One of the recent fiscal measures, le bouclier fiscal or the tax cap (a.k.a. tax shield) limited all direct income taxes to 50% no matter the income bracket. I wrote about this recently on Bonjour Paris. Those who defended it said it lightened the load of taxes, but those opposed to it reckoned it protected the wealthy while not contributing to reducing the deficit and debt.
Recent debate lead up to today’s decision, announced today by Prime Minister François Fillon, to end the policy. (However, some sort of tax cap will remain in place, at an unspecified percentage, for the less well-off, which make up 52% of the beneficiaries). You can see the French article from Le Point at the link above, and the video from BFM TV below.
Below the video, excerpts from this Wall Street Journal article. Next on the agenda: reforming or abolishing the wealth tax (see more in WSJ and Bonjour Paris articles as well as a detailed report by Le Figaro), which could help as many as 300,000 households pay less tax.
What are your thoughts on these developments?
EUROPE BUSINESS NEWSMARCH 3, 2011, 7:38 A.M. ET
French Prime Minister Says Tax Shield to be Abolished
By WILLIAM HOROBIN
PARIS—French Prime Minister François Fillon Thursday confirmed the government intends to abolish a tax shield that has become a controversial hallmark of Nicolas Sarkozy’s presidency.
Mr. Sarkozy decreased the threshold of the tax shield shortly after coming to power in 2007 so that no taxpayer pays more than half their income in taxes. But his ratings have hit record lows and the tax shield has become a thorn in his side as many voters see it as a measure benefiting the wealthy few.
“We have to face up to reality: the tax shield has been misunderstood, and the crisis has probably made our citizens more sensitive to some of its effects,” Mr. Fillon told a conference, organized to discuss the reform of property and capital taxes that Mr. Sarkozy has promised for the first half of 2011.
The tax shield was designed in part to limit the impact of France’s wealth tax, which Mr. Sarkozy also intends to reform before the presidential elections in May 2012.
The government says it will either do away with the wealth tax completely or significantly modify it. Mr. Fillon said Thursday said the reform will free 300,000 households from the wealth tax.
Yet the government is insisting the reform must have a neutral impact on public finances at a time when France is fighting to rein in deficits. If the wealth tax and the tax shield are abolished, the government will need around €3.2 billion ($4.44 billion) to make up the shortfall.
“We won’t finance this reform with debt. Balancing the budget will be strictly respected,” Mr. Fillon said.
He also ruled out a variety of options that have been suggested in recent months. The government will not tax gains on the sale of main residences, will not reverse its reduction of inheritance tax, and will not introduce an additional tax bracket, Mr. Fillon said.
Mr. Fillon also said the reform of capital and property tax is one of the reforms necessary for greater tax convergence in the euro zone.
European leaders are negotiating a competitiveness pact for members of the euro zone. Some countries have balked at Franco-German proposals that they fear would compromise their sovereignty in sensitive areas like pensions and salaries.
Mr. Fillon said France and Germany should aim to harmonize corporate taxes, starting with the base of these taxes before looking at the rates.
I have an article covering a wide array of subjects in this week’s Bonjour Paris. This includes the French economy, Nicolas Sarkozy at Davos, Obama and the French, fashion week, gay marriage in France…You can read it here.
The contested pension reform has become French law, but some unions (CFDT, CGT, FSU, Solidaires, Unsacette) and other opponents to the measure are insisting that the strikes must go on. But it likely won’t have any important impact, except for annoying commuters and parents. However, traffic will not be nearly as disrupted as other days. It has been a long road of reform and protest, as France24 writes.
Le Volontaire has a list of strikes organized around France, by départment (and city).
Left-wing newspaper L’Humanité unsurprisingly calls this an “unjust reform” and supports the strikes, with a list of cities participating (similiar to the one above, with some variation). In Paris, the action will start at metro Opéra at noon, pass by la rue du Quatre Septembre, la Bourse des Valeurs, palais Brongniart and finish at place de la Bourse around 2pm.
On the other side of the political spectrum, business newspaper Les Echos (like the French Wall Street Journal) is calling this the “last-ditch stand” (baroud d’honneur) of unions.
According to the SNCF’s site, TGV, Téoz and Intercité trains will not be affected. However, certain regional TER trains could be (look by region). So far the Paris area RATP website is not updated with strike information, but will likely have delays on certain bus lines that go to métro Opéra.
THIS JUST IN: The following bus lines will be interrupted with irregular intervals between about noon and 2pm tomorrow in Paris: 20, 21, 22, 27, 29, 39, 42, 48, 52, 53, 66, 67, 68, 74, 81, 85, 95 and Roissybus. This is especially important for those planning on taking Roissybus from Opera to CDG Airport. If you think this may disrupt your plans, you can opt for RER B at about an equal cost (around 9 euros), or taxis will run you about 35-40 euros. The
For updates on RER suburban line trains, you can see this site. Lyon’s TCL transport system will not be affected. For updates on other cities’ transport systems, you can check this link from a previous strike day. You can check the status of trains in major stations at this site.