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The French economy has been hit hard by the global recession and, more recently, by turmoil in the euro area. As confidence recovers, activity should pick up gradually in the coming two years and the unemployment rate stabilise in late 2013. Yet, France faces serious long-term challenges.
The political timetable offers a unique opportunity to implement an ambitious strategy of reforms to make government less costly and more effective and to raise seniors’ employment and improve the prospects of the young. Recent adoption of the Employment Competitiveness Tax Credit and the labour market agreement between social partners send encouraging signals. The functioning of the labour market needs to be further improved. Greater competition in services and rationalisation of housing policies are crucial reforms to boost purchasing power, create jobs and enhance competitiveness.
Fiscal consolidation remains a priority. Recent governments have shown laudable determination to restore public finances to good health following decades of rising public indebtedness. Deficit reduction efforts must continue as planned while letting automatic stabilisers operate fully. Public spending is very high as a percentage of GDP and needs to be reduced over time to ease the tax burden in the medium term.
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Tax and transfer changes can raise efficiency without sacrificing equity. The size, complexity and instability of the tax and transfer system weigh on the economy, calling for thorough going simplification. Savings are taxed very differently depending on asset classes, and, more generally, tax bases, including for VAT, are narrow. Reforms to unemployment benefits would save costs and promote employment.
Improving the situation of young people calls for wide-ranging reforms. Replacing the many income-support programmes with an extension of the minimum income scheme to young adults would allow the intensity of poverty to be reduced, but this change must be coupled with an effective requirement to train, search for and accept work. The high minimum wage tends to exclude the least educated youths from jobs. The transition from school to work is indicative not only of weaknesses in the labour market, but also of an unsatisfactory education system and a poor distribution of resources that generates dropouts, and a still too fragmented and tightly controlled tertiary system.
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- Weak trend per capita GDP growth but stable income inequality in France
- General government expenditure as a percentage of GDP in France and other OECD countries
- Public and private pension spending
- The labour tax wedge is high in France, 2011
- Regulation is still heavy
- The relative minimum wage is high
- Relative minimum wage by region, 2009
- French employment rates vary widely by age bracket
- Sensitivity of the youth unemployment rate to economic fluctuations, 15-24 years
- Ratio of PISA scores of the best and worst students, 2009
- Ratio of annual spending per primary school pupil to that for upper-secondary education, 2009
How to obtain this publication
The complete edition of the Economic Survey of France is available from:
For further information please contact the France Desk at the OECD Economics Department at email@example.com.
The Secretariat’s draft report was prepared for the Committee by Hervé Boulhol and Balázs Égert under the supervision of Peter Jarrett. Research and editorial assistance was provided by Patrizio Sicari.