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French report French report
by Euro Reporter
2012-09-12 08:32:42
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France's Hollande Outlines Austerity Goals

French President François Hollande on Sunday sought to brace the nation for its toughest budgetary effort of the past six decades, as he outlined a raft of austerity measures—including a controversial tax on the rich—to shore up public finances. In a television interview, Mr. Hollande said he has given himself two years to turn around France's economy and acknowledged the gravity of that task. He said the country's growth prospects have clearly deteriorated and significantly downgraded the growth forecasts to "barely above zero" for this year and "about 0.8%" for 2013. France's first Socialist president in 17 years used his prime-time television slot to seek to counter criticism that he is moving too slowly to fix France's problems and that he has failed to be decisive. "I'm not going to do in four months what my predecessors haven't done in five or 10 years," said Mr. Hollande. "I am in combat mode." He said he was "accelerating things."

Mr. Hollande said his government would propose a budget this month packed with as much as €20 billion ($25.6 billion) in new taxes and €10 billion in spending cuts. He confirmed that the budget will include a special 75% tax for people earning more than €1 million a year that has fanned fears of an exodus of France's wealthiest citizens. The painful measures are necessary to fulfil pledges to lower the country's budget deficit to 3% of gross domestic product next year from 4.5% in 2012 and reassure investors, who have been more lenient with France than with other highly indebted euro-zone countries such as Italy and Spain. Mr. Hollande was elected in May with a pledge to shift the burden of economic hardship onto the rich and to resolve the protracted euro sovereign-debt crisis by softening the German-inspired prescription of austerity. Stimulating economic growth, Mr. Hollande said, would make restoring the health of public finances easier.  But the French economy has stalled—it has failed to expand for three straight quarters—and unemployment, at more than 10% of the population and rising, has returned to levels last seen 13 years ago. Restructuring plans at large French companies, ranging from auto maker PSA Peugeot Citroën SA to flagship carrier Air France-KLM, have left the Socialist government dealing with thousands of politically sensitive layoffs.

Just four months into his mandate, Mr. Hollande's popularity is sliding, as more French people question whether he is doing enough to fix the economy. A survey conducted by BVA and published Sunday in French newspaper Le Parisien showed 60% of people interviewed were dissatisfied with his performance. "Over the summer, the French were under the impression the government was absent," said Jean Chiche, a political-science professor at Paris Sciences-Po university. "Mr. Hollande needed to reassure his own electorate." Mr. Hollande shrugged off the polls, noting that this "was part of political life" and stressed his efforts to reverse the trend in unemployment, though he said this would take at least a year. Mr. Hollande put pressure on unions and businesses to agree on wide-ranging overhauls of the country's labour market by the end of the year, adding that otherwise, the government would intervene. The goal, he said, is to boost job protection for workers and at the same time allow companies to better adapt to the highs and lows of the economic cycle.

Mr. Hollande has delivered on some his key campaign promises as he sought to satisfy his core base. In July, he toughened the wealth tax on rich taxpayers and scrapped some fiscal advantages for large inheritances. But the moves haven't been without controversy; with French companies warning that the country's high tax structure is hampering their ability to recruit and potentially sparking an exodus of the country's rich. Those fears were fanned over the weekend after Bernard Arnault, France's richest man and chairman and chief executive of LVMH Moët Hennessy Louis Vuitton SA, said he was seeking Belgian citizenship. Mr. Arnault stressed he would remain a taxpayer in France and said via a spokesman that his request for dual Franco-Belgian nationality was for personal reasons "and should not be the object of any kind of political interpretation." Still, during his interview, Mr. Hollande scolded the businessman, saying, "He should have measured what it means to apply for citizenship to another country. In this period, we need to appeal to patriotism."


France pushes for strategic food stocks to cool prices

French President Francois Hollande said on Tuesday he was trying to persuade other world leaders to create strategic stockpiles of agricultural commodities to prevent extreme food price swings on international markets. A drought in the U.S. Midwest and the Black Sea regions sent grain prices to record highs this summer and raised concerns of a repeat of 2008, when a spike in food prices triggered riots in some countries. "I am pushing with heads of state and government for protection against (market) volatility in the form of emergency food stocks," Hollande said in a speech to farmers in Rennes.

"I propose to implement market management and crisis management policies by setting up strategic stocks," he said, stressing that he was "convinced of the benefits of global governance for subjects as crucial as food security." His is one of the first calls by a world leader to set up a strategy to be able, when shortages emerge, to pour supplies into a market where prices are mostly moved by fundamental elements such as supply and demand. However, it is unclear how major producers such as the United States, Russia or China would welcome such an initiative at a time of economic gloom as the price of food storage, most of which is in the hands of commercial companies, is costly and sensitive. Hollande did not specify what food the reserves could include or where they could be located.


France Announces Plan to Allow Gay Marriage

The French government has outlined its plans for gay marriage and adoption. Justice Minister Christiane Taubira told La Croix newspaper Tuesday that the government wants to extend the current arrangements of marriage to same-sex couples. Such a law would also allow gays to adopt children either as individuals or as a couple.

A bill on the issue is expected to be presented to the Cabinet next month.  France currently allows civil unions between same-sex couples, but does not allow them to adopt as a couple. The Catholic Church has voiced opposition to the plan.

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