Déclaration de M. Francis Mer, ministre de l'économie, des finances et de l'industrie, sur les signes de relance économique, sur quelques dossiers gouvernementaux comme la réforme des retraites, la question des 35 heures, sur les choix à faire pour rendre
Date: 2003-10-28
Orateur: Francis Mer
Fonction: FRANCE. Ministre de l'économie, des finances et de l'industrie

Today France is at a turning point. Our growth has been disappointing since 2001, but our ambition is to achieve a significant and robust growth rate. We want to give the country the best chance to win this battle. With this purpose in mind, we have one coherent strategy, summed up in one word : reform. 1 - Why I believe that we will rebound The last two years have been disappointing for the Eurozone, including France. Of course the international developments have affected the economic players. But this is not the only reason. Investment was held back by deteriorated corporate balance sheets and financial markets. Household consumption declined more than expected. Meanwhile, the policy-mix was less stimulating in the Eurozone than in the United States (this is a polite way of putting it). I will shortly come back to budgetary policy. But the chances of a rebound in the near future are good and I believe that France is well placed to take these chances. - First of all, we see encouraging signs of an upturn. The leading indicators are particularly vigorous in the United States and Japan. But there are also signs of a recovery - albeit less strong - in some countries of the Eurozone, such as Germany and France. The conditions for growth are there. The international environment has improved markedly and easing monetary and financial conditions are helping to restore domestic demand. From this perspective, France is well-placed. The consolidation of corporate balance-sheets is well underway. Financing conditions have become very attractive and the financial markets are rebounding. Investment can be expected to start picking up before the end of the year, even if the momentum will be slowed by the balance-sheet consolidation efforts of a few large corporations. Household consumption can be expected to improve in the months ahead, as shown by the recent excellent household consumption figures for September.Our latest projections forecast growth of 1.7% in 2004 for France and for the Eurozone in general. - Secondly, these signs of recovery build on solid foundations. France is well-placed as a productive economy integrated successfully in the world economy. France is a productive country. In its latest report, the IMF notes that the French produce 15% more per working hour than the Americans. I can hear you say that the French are working only 35 hours a week This is obviously a two-dimensional picture. As I have said before, the 35-hour working week was a bad reform since it was imposed from the top down by the government, was not introduced in response to any claim and has devalued work. It is altogether not in favor of the French workers as it has constrained wage raises and public finances. All the same, the business community has gradually adapted itself since it benefits from large reductions in employer's charges and that the current government has significantly upgraded the flexibility of this system, particularly for small and medium-size businesses. France's productivity is in fact built on deep and stable foundations, particularly the following structural factors: high qualifications, high production standards, recognized infrastructures and quality government services (health, education, security and general government services). This last point is essential, just as it is essential to work on the underlying cost of these services to keep it reasonable. Combined with competitive labor costs compared with other European countries, France's productivity makes it an attractive country for foreign investors, as the vigor of Foreign Domestic Investment shows. At the same time, French businesses continue to expand abroad. All this is confirmed by striking figures: one-third of all jobs are created by foreign investors, 60% of the workforce of the 40 companies with the largest market caps on the Paris stock exchange is based in foreign countries. Indeed, the attraction is stable because it is felt both ways. This became clear during the recent crisis: while international investment flows fell by about 44% in 2002, investments in France dropped by only 11%. More international players establish themselves in France than in any other country except the United Kingdom. France also attracts the second-highest investment volumes. 2 - To take advantage of the better economic environment and build on our solid foundations, we have a consistent strategy : in-depth reform French society is less tense than is frequently believed but needs to reform in depth. Our society is ageing, we run into logjams on the labor market, the government tends to interfere too much, and so on. Our government has the responsibility to use the historic opportunity created by the length of its term. This reform strategy hinges on 3 main lines : implementing a responsible public finance strategy pushing through the major reforms fostering entrepreneurship in all its aspects A. I'll begin with our much commented public finance strategy. I know that the French position is less controversial for US observers than it is sometimes in Europe. But I will not take too much advantage of this pleasant situation! I want to repeat two convictions : 1°/ We need to ensure public finance sustainability. It would have been better, of course, if the previous government had assumed its responsibilities and restored room for maneuver when growth was strong. It unfortunately failed to do so and it is now up to us to prepare the future, especially the impending "gray wave". This is why we have started to curb public spending on a firm and lasting basis, without being impeded by the traditional inhibitions of French society on this subject. The time has come to understand that the best expense is not a rising one. We intend to continue lowering expenditure with determination through the medium term. 2°/ We need to respect our European commitments. We have a single currency, which subjects us to a collective discipline. Our commitments are credible, both because we are determined to honor them and because they are realistic in the current economic environment. Reducing the deficit in 2004 will be the first touchstone of our budgetary credibility. The second will be returning to the common target of 3% of GDP by 2005. B. To secure this forward-looking public finance strategy, we have to go through extensive reforms. The government's priorities are the major reforms required by France's structural population trends. France is an ageing country in an even more rapidly ageing Europe. Migratory inflows have failed to correct this trend to the same extent as in the United States. We have a crowded program. When we started out, we decided to increase its chances of success by tackling the problems one after another according to a tight schedule. Pensions were the first issue on the agenda. Parliament approved the reform this summer. The government announced and stuck to its method, which was to demonstrate the need for reform and to announce its timetable; to carry out an expert analysis and to work out the main lines; to engage in an upstream dialogue with all stakeholders; to resist fear but to listen to questions; and, lastly, to implement the reform. We want to use the same approach for health-care reform, a reform which is complex but essential to consolidate the public accounts. We are currently carrying out an expert analysis, while interacting with all stakeholders. Despite the complexities, we are sticking to a tight schedule. By next year, our social security system will be back on track. The third reform is even more difficult but just as vital. This is the State reform. Through the impetus of structural trends, such as budgetary accounting reform, the move towards decentralization and the European integration process, we have embarked on a strategic reform of the State's role. This reform has too many ramifications to be completed in one year but it is well underway. C. Although the "major reforms" drain much of our energy, they are not enough by themselves. We must continue to boost our strengths and to remove rigidities. Our general goal is to rehabilitate work, in contrast with the past. It is also an input in the measures we take. To promote work, we have clearly chosen to make work pay. This goes for all job categories but especially for low wages: with our decision to relax the conditions of the too famous "35-hours", a worker can choose to earn more by working longer ; with our lower income tax and higher earned income tax credits policy, his take-home pay improves ; which, with the decrease of pay-roll taxes, is sustainable for his company. On top of this strategy, we are focusing on the following three priorities : fostering entrepreneurship promoting innovation gearing public policies to France's attractiveness 1st priority: fostering entrepreneurship Because business creation is the backbone of the value-creation process, we have launched a plan to encourage the spirit of enterprise, thus to help the very many "potential creators" to be found in our country to "take the plunge" and develop their own businesses. In particular, this law: makes setting up a company a particularly simple matter (possible on the Internet with just 1 euro of capital); it enables new entrepreneurs to postpone the payment of social insurance contributions in the first year before the first euro of sales is earned; it also gives entrepreneurs the possibility of setting up their own firms while still remaining employed during the start-up phase. Lastly, I should add that entrepreneurship also concerns the State and clarification of the relations between the State and state-owned enterprises. Many state-owned enterprises with competition-driven businesses are to be privatized in the months ahead. We have changed the status of several enterprises to make sure they are immediately operational when market conditions are right (France Telecom, which has completed a brilliant takeover of Orange; Air France, which is currently merging with KLM; and soon EDF and Gaz de France). Moreover, we have beefed up our teams with a new agency for State holdings in the Treasury. 2nd priority: promoting innovation I am impressed by the American example on innovation and I have looked for ways to support the same dynamism in France. Hence, our government is extending the tax incentives benefiting firms undertaking substantial spending on R D. Three important measures have been decided and are now in the course of being voted by the French parliament for implementation on January 1st, 2004: The "Crédit Impôt Recherche" (R D Tax Credit), which until now was reserved for firms stepping up their R D spending, will now involve all firms spending money on R D. We are also setting up a legal and tax framework specifically designed for Business Angels, who are still too few in France compared with the Anglo-Saxon countries. This framework offers substantial tax incentives (exemption from corporation tax and capital gains tax) in order to improve the remuneration of the risk they take in backing startups. Specific tax incentives have also been introduced for the "Jeunes Entreprises Innovantes" (Young Innovative Firms), in other words firms less than eight years old, created to exploit an R D project and with 15% of their expenditure going into R D. These firms will be: exempted from social insurance contributions for a period of eight years in respect of staff participating in R D projects; exempted from local taxes and corporation tax; their shareholders will be exempted from capital gains tax. This new arrangement is well suited to newly-fledged firms that are starting up to exploit R D projects involving costly investment and for which the returns may be uncertain and far into the future Through these measures, and some others, France is therefore now one of the most attractive countries in the world for talented young people, for the engineers, the researchers and the entrepreneurs wanting to develop a firm on the basis of an R D project. 3rd priority: gearing public policies to France's attractiveness In our modern economic environment, corporate headquarters are mobile sites. This is no reason for fear but a stimulus to make our economy more competitive. We have decided to put the entire administrative machinery at the service of this strategy, since France's attractiveness requires the commitment of all public and private players. When an economic policy is frankly growth-oriented and offers dynamic individuals the means to pursue their business plans concretely, it must also be hospitable for those who contribute to the overall momentum. This is why the government has launched important reforms to make France more attractive for talents, senior executives and researchers. This is inter alia reflected in initiatives to improve the host environment for talents who come to France to help strengthen its economy. We are considering the implementation of extremely tempting tax exemptions on the expatriation bonus of foreigners sent to France by their employers. Because the brakes are not only financial, we are also looking at ways to help them establish themselves, e.g. by simplifying administrative formalities, improving conditions for their spouse or facilitating education for their children. D. Improving the host environment is also an objective for our financial market and corporate environment. We want to make the market more competitive by upgrading security and financial transparency. In a word, we want to make sure that we are at the "best practice" level on each compartment of the market. The Paris market is showing signs of a recovery : the main French stock market index, the CAC 40, has gained more than 40% since the low hit by all stock markets in March. However, France's competitiveness is not only reflected in figures but also in the regulatory framework available to investors, which is designed to keep the market competitive in the long term, in bad and good weather. The Financial Security Act passed on August 1, creates a new financial market authority, with authority over all links in the financial information chain. Appointment of its management teams is underway and it should be ready to roll next month. We have also upgraded regulation of the audit profession. This reform tightens regulation of auditors by providing France with an independent public body, the High Audit Council. It clearly reaffirms the principle of separating audit and advisory services. The Financial Security Act also boosts the transparency and quality of financial information in all essential areas of good corporate governance, especially the information required from listed companies: organization of internal control, relations with auditors, communication to market players of corporate governance practices. I applaud the quality of the Code of Good Conduct developed by the French private sector itself in the wake of the Viénot and Bouton reports, which gives a detailed description of a body of best corporate governance practices. Most large listed companies are already in compliance with these recommendations. As you know, Europe has also decided to adopt the IFRS, the new international accounting standards developed by the IASB. France endorses this approach and advocates the adoption of an international standard designed to ensure optimum financial reporting. This has not prevented France and the Commission from intervening firmly with the IASB to ensure the new standards take better account of their economic and financial constraints and can be applied in practice. I know that prominent speakers will take the floor on this issue later today during the keynote discussion, and I trust a balance can be achieved. In conclusion, I hope I have convinced you that we are working all-out to make France in general, and the Paris market in particular, more competitive. Our initiatives align with a long-term national strategy which I will summarize again in a few words: - pushing through major basic reforms: pensions, health, government services; - raising the value of work, innovation and research in order to breathe new life in French society; - gearing public policies to France's competitiveness. Thank you for your attention. (source http://www.minefi.gouv.fr, le 10 novembre 2003)