Wednesday, June 24, 2009 at 05:41 PM EDT
But now thereâ€™s some good news for French investments. As many good Frenchmen, Sarkozy might prefer first to concentrate on his private life when elected President. Once his private life is now complete, heâ€™s been able to spare some time for Franceâ€™s economic problems. And the results for Franceâ€™s future economic performance and French investments are quite positive.
First, Sarkozy got rid of the 35-hour week. This economy destroying measure, by which companies were forced to set up a maximum 35 hour workweek, was brought in by Lionel Jospin, Premier Socialist in 2000, and has embedded itself throughout the French economy, increasing labour costs, dropping productivity and damaging French investments. Removing it will not make much difference for big business â€“ as one union leader said â€œnobody wants to renegotiate the 35 hours and reopen Pandoraâ€™s box,â€ but it will make a huge difference for medium-sized and smaller businesses, which will be able to match their workforce with the demands of their business, without being forced to get into the rigid models by the state.
Sarkozy has also passed reforms freeing up Franceâ€™s retail sector to increased competition with longer operating hours, tighter regulation of unemployment benefits, and autonomy for firms to negotiate directly with employees rather than deal with a union.
In addition to these economic reforms, Sarkozy has pushed through constitutional reforms, limiting the president to two five-year terms and giving the legislature more power to introduce legislation. That is not the big reform formerly announced, but just a first step in the way for.
The remarkable feature of Sarkozyâ€™s split of reformism is that the French unions have been unable to connect and rely with the streets of Paris with major demonstrations, as they had done to stand several previous bursts of reformism in the last decade. A Day of Action protest in 19 March had only half the expected audience and the May nationwide strike had only 4% support. Point barre, end of discussion.
But Sarkozyâ€™s tactic has been to move forward with reforms on several fronts at once; this seems to have worked during 2007, and Sarkozyâ€™s opinion poll numbers have recovered from lows hit till late autumn of 2008, when the financial breakdown started. Yet, it is true that his attractiveness has endured since, similar to several of his colleagues in the European neighbourhoods.
Facts and figures to Sarkozyâ€™s advantage
The benefits of these reforms will be seen most clearly in Franceâ€™s next period of economic expansion, which may not be immediate because of the general global slowdown. Franceâ€™s gross domestic product [GDP] is expected to decrease by 0.7% in 2009, according to the Economist, a bit better as the average for the 15-nation Eurozone as a whole.
On the bright side, inflation is expected to be only -3.2%, below the Eurozone expected average and well below U.S. inflation rates. The balance of payments deficit is only 1.6% of GDP, well below both the United States and Britain, in spite of the current high valuation of the euro. Euro short-term interest rates are currently 3.55%, above Franceâ€™s inflation level, and French long-term government bonds yield 2.8%, well above inflation, so there is no danger of an inflationary spiral. A deflationary situation is yet possible in early autumn 2009,
French economy handicaps
It is a mandatory to get out the French companies off public handouts: a
sort of usual public allowances run between companies, authentic availability
of free / cheap working force, trainees and complete dependant underdogs, lack
of competition in many sectors, lack of penalties for corporate officers,
abusive tax exemptions / reductions, volunteer lack of judges at labour
assessment and safety inspectors. The french are among those of the OECD who
work most for a grotesque wage related to the cost of living. It is most
necessary to get effective control over the business and tax them only on their
real add value and their employment rate. It is time enough of all these banks,
estate agent or other telephone vendors that serve no purpose except to
increase inflation and delay the French competitiveness. Investing in
university research and development instead of distorting the economic market
by offering it to a band of idle heirs.
This article originally appeared on Second Nature (Zikipediq's Blog).