Friday, Oct 22, 2004
Poor productivity slows French economy
By Vaiju Naravane
PARIS, OCT 21 . A `work deficit' is slowing down the French economy according to a report on the nation's economic health by Michel Camdessus, former director of the International Monetary Fund (IMF).
The report, commissioned by France's new Finance Minister and presidential hopeful, Niccolas Sarkozy, calls for an immediate shake up of the system, warning that the French economy will slip further into decline unless working hours and methods are drastically overhauled to permit greater flexibility. It also calls for a dramatic increase in the French budget for research and development.
The report points out that during the past ten years, the French economy grew at a much slower rate than that of the U.S., Britain, Finland, Sweden, Canada or Denmark. Unemployment has not decreased - it continues to affect about 11 per cent of the active population - while poverty is gaining ground. Mr. Camdessus does not hold much hope for the immediate future. A rapidly ageing population is eating into public surpluses and pushing up deficits in the pensions and health care sectors. A sluggish economy is likely to make these deficits larger - economic growth is not expected to reach the predicted 2.25 per cent but is likely to hover around 1.5 to 1.75 per cent.
Mr. Camdessus' warning comes at a time when France has to make some painful decisions about restructuring the economy, even consider reducing wages, pensions and other benefits. At the moment, French workers legally put in a 35-hour week. The French population also enjoys one of the best health care and pension schemes in the world.
At the rate at which the country is going, Mr. Camdessus said, "We will enter into an infernal spiral: public deficits go up, the interest burden reduces the State's margin for action. The State will be further weighed down by increasing pensions and health care costs. The system will break down." Over the past 25 years, the resources at the disposal of the State after servicing the national debt have been reduced by 25 per cent.
He said the poor figures were explained by the lack of productivity of French workers who were far less productive when compared to their U.S. counterparts. The report calls for an urgent overhauling of the rules of the workplace. Workers rights are heavily protected by a plethora of complex laws, making firing difficult.
The report has been denounced by trade unions saying it reflects the ultra-liberal, Laissez Faire thinking of French employers and the present right wing government. The French Employers' Federation (MEDEF) has been calling for greater flexibility in rules governing hiring and firing of employees.
Copyright © 2004, The Hindu.