Call by French business chiefs marks Hollande’s debt meet

PARIS - Agence France-Presse

French Minister for Industrial Recovery Arnaud Montebourg (C) looks at an employee working a Renault plant. French top bosses want the government to slash public spending by 60 billion euros. AFP photo

The biggest business leaders in France turned up the heat on embattled President François Hollande with demands for radical reforms just as he headed into crisis talks yesterday with the heads of the International Monetary Fund (IMF), World Trade Organization (WTO) and other top economic bodies.

As Hollande launched talks on the eurozone debt crisis and ways to revive growth, the heads of 98 of the biggest French groups pleaded the case for a 30-billion-euro cut in welfare charges paid by French employers over two years, and massive cuts in public spending.

“With a record public spending of 56 percent of gross domestic product, we have reached the limit of what is tolerable,” said the Afep, which represents more than 90 of France’s top companies, in an open letter to the president.

Their onslaught against increases in taxes and charges comes in the midst of growing national controversy of ways to make lagging French industry, with factory closures announced almost every week, competitive in international trade.

But two leading ministers immediately rejected such radical action. The revolt by big business comes just weeks after small business entrepreneurs forced the government to re-think proposed taxes on the profit of selling a start-up. France has a huge structural trade deficit. Hollande, on the ropes in opinion polls and under attack for perceived muddle in the government, is grappling with pre-election pledges to create jobs and spur growth while applying austerity to plug a 37-billion-euro ($47 billion) hole in public finances.

Profit margins at ‘record lows’
“For companies, the working costs must be reduced by at least 30 billion euros over two years by cutting the employers’ portion of welfare charges,” said the letter published in the Journal du Dimanche weekly.

The business leaders also called on the French government to slash public spending by 60 billion euros - or 3.0 percent of gross domestic product - over five years.

“Our (profit) margins are at record lows,” they said, also evoking the record unemployment level which has breached the three-million mark to a rate of more than 10.0 percent.

The pressures closing in on Hollande include sweeping job cuts. Auto group PSA Peugeot Citroen alone has announced the loss of 8,000 jobs and the closure of an emblematic plant near Paris. It has just been rescued with a government guarantee of 7.0 billion euros ($9.0 billion) for its banking and credit arm. Hollande -- whose ratings have dived since he took power in May - meanwhile met World Bank chief Jim Yong Kim, the IMF’s Christine Lagarde, WTO head Pascal Lamy, International Labor Organization Secretary General Guy Ryder and the OECD’s Angel Gurria in Paris.

An official told AFP that Hollande had called the meeting “to discuss international economic issues and economic and social recovery ... to spur growth, jobs and competitiveness.”

The leaders of the organizations were then set to go to Berlin to hold talks with German Chancellor Angela Merkel today.

The meeting comes amid tortuous efforts to battle the contagion threatening the euro currency zone and different approaches advocated by the heads of the bloc’s two main economies - Merkel and Hollande. Merkel believes sustainable growth requires debt reduction through austerity measures while Hollande advocates more public spending to kick start the economy.