NCPA - National Center for Policy Analysis


May 11, 2007

France's new president, Nicolas Sarkozy, will have a tall task in making reforms to improve the country's lackluster economic performance, says the Washington Times.


  • France's per capita gross domestic product declined from 7th in the world to 17th, and the unemployment rate hasn't fallen below 8 percent in the last quarter century.
  • In none of the last five years has the French economy grown as fast as the average rate for the 30 industrial economies that comprise the Organization for Economic Cooperation and Development.
  • Its economic growth rate during 2006 was the slowest of any nation in the European Union except Portugal.
  • As a share of labor costs, taxes on the average French worker exceed 50 percent.

Sarkozy, however, does have several ideas for reform:

  • Add much-needed flexibility to the labor market by reducing payroll and income taxes on labor above France's legislated 35-hour workweek.
  • Change labor contracts to make it easier to hire and fire workers.
  • Reduce the power of striking workers by requiring them to provide minimum levels of services in transportation and elsewhere.
  • Reduce both the tax burden -- by lowering personal, corporate and inheritance tax rates -- and the budget deficit by raising growth and reducing unaffordable pension obligations in the public sector.

On the negative side, Sarkozy remains an aggressive protectionist, pledging to raise Paris's contribution for farm subsidies if the European Union agrees to reduce them and favoring competitive depreciation of the euro in order to increase exports.

In sum, Sarkozy offers some hope on France's domestic economic front -- if he can hurdle the huge barriers confronting him, says the Times. But he remains suspect on international economic policy.

Source: Editorial, "Sarkozy's economic challenge," Washington Times, May 10, 2007.


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