France embraced change at its recent presidential election, writes its minister for the economy and finance. Now Emmanuel Macron’s new government aims to transform the economy by reforming labour laws, cutting business taxes, boosting training and overhauling the pension system. It also has its eye on shaking up the EU.  

Bruno Le Maire

In the past few years, I have lost count of those saying that France was on the brink: a stagnant economy, a divided society and politics at breaking point. Instead of all that, the French people made a clear choice in May, a choice of hope and openness. By electing Emmanuel Macron as president, they sent a message of optimism and openness to Europe and the world. They expressed a desire for political change and their strong expectation for ambitious economic reform.

France has plenty of assets, but for too long these have been undermined by over-taxation and red tape, complex labour regulations, insufficient flexibility, and instability of fiscal and business rules. We need to fix this urgently.

As growth has returned both in France and the euro area, some could be tempted to forget about the necessary reforms and to lapse once more into the bad habit of postponing them. But this will not happen. We will build on the political momentum raised by the recent presidential election to carry out the transformation of our economy and to be ready to face the challenges ahead.

Employment reforms

Our top priority is to transform our job market to help entrepreneurs create more jobs. At the end of July, the French parliament authorised the government to adopt the necessary executive orders. We will increase the flexibility and predictability of the management of employment contracts. We will cap compensation claims and the duration of proceedings in cases of unfair dismissal. We will modernise social dialogue by increasing the scope of workplace agreements.

In addition, we will reform life-long training schemes to provide the skills our economy needs. We will initiate a structural overhaul of our pension system. We will enhance our unemployment benefit system, making it accessible to the self-employed in particular to encourage entrepreneurship. In all our reforms, we will strive to maintain a balance between flexibility for employers and security for workers.

We are well aware of the need to provide as stable and clear an environment as possible for companies and investors. Government regulations should help companies and offer them favourable conditions for the creation of growth and jobs. This will be our prime concern.

It means a lighter, simpler and more predictable tax system. As promised by Mr Macron, the corporate tax rate will progressively decrease over the next five years, to eventually reach 25% – the average rate in the EU. This will make all companies based in France more competitive, it will help attract new businesses to our country and help them thrive. We also want to make France more investment friendly. Finance is not our enemy; it is the fuel for growth. We will show investors that we are ready to do what it takes to make France even more attractive, by replacing the current complex system with a 30% flat tax for all capital revenues.

These changes will be examined in parliament this coming October and implemented as soon as 2018. And once our tax system is overhauled, we are committed to leaving it alone and maintaining stability for the duration of Mr Macron’s mandate. Businesses need to know what to expect so we cannot go on changing the way the tax system works every six months.

But improving our business environment is not only about labour law and taxes. Some feel that it is difficult in France to set up and run a business. Administrative processes are deemed too complex and the authorities are not always receptive. This will change as well. We will cut red tape and introduce more flexibility, for example through new rules to ensure that the public authorities support new businesses, rather than immediately sanction.

Moreover, long gone are the days when you could only do business or speak to our regulators in French. We understand the need to make things easier for financial institutions operating in France. To give one very practical example, we will create a special court to handle disputes relating to financial contracts governed by English law, once the UK leaves the EU. All proceedings will take place in English. We will hire people with experience in common law, regardless of where they come from.

Promoting Paris

If we want our economy to reach its full potential, ambitious goals are needed. There is no doubt that New York and London are the leading financial centres in the world. But Paris is the leading financial city in continental Europe and offers a complete financial ecosystem, from corporate and investment banking to asset management and insurance. Besides, our financial industry is leading innovation in various fields such as financial technology and green finance.

Our ambition is to strengthen Paris’s position as a major financial centre. In addition to the reform of general labour regulations, we will take further steps to make the job market more flexible and less costly for financial businesses. We will cut a portion of the payroll tax for the highest wages and exclude bonuses from the calculation of the severance pay for traders.

A sound dialogue with regulators is key to promote a robust and innovative financial industry. France already boasts highly skilled national regulatory agencies. Paris is now a candidate to host the seat of the European Banking Authority, which will have to relocate after Brexit. Together with the European Securities and Markets Authority, this would give birth to a high-performing regulatory hub closely connected to a vibrant cluster of financial activities.

We also want France to take part in the current digital revolution and, more generally, to be a leading country for innovation. We have all that is needed for that: major universities and a tradition of excellence in several important fields. But we will also create a fund of €10bn for the development of disruptive technologies.

Supporting the EU

Our economy is deeply intertwined with the rest of the EU, in particular the economies of the euro area. And for us to grow more, it is essential to make the EU as a whole and its 27 members stronger. To achieve this, we will promote changes in the way Europe works.

The architecture of our monetary union must be strengthened to make it more resilient to crises. This will be done by completing the banking union and by deepening the single capital market. We also want to turn the monetary union into a fully integrated economic union. This requires a budget for the euro area, which would enable us to invest in innovation, act as a lever for macro-economic stabilisation and foster the necessary convergence between our economies.

Last but not least, we want Europe to better protect its members’ interests against the rise of protectionism and unilateralism. The EU must assert more strongly its position on the principle of full reciprocity in business relationships.

Bruno Le Maire is France's minister for the economy and finance.


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