OECD: French reforms don’t go far enough

7 Apr 15

Current reforms in France are not enough to boost the labour market, curb high levels of public spending and tax, the Organisation for Economic Co-operation and Development has warned.

An economic report, presented in Paris by OECD secretary-general Angel Gurría and French minister for finance and public accounts Michel Sapin, praised reforms that have been undertaken in recent years to improve productivity and competitiveness.

But it added that the outlook was fragile and insufficient to secure a significant reduction in unemployment.

The OECD said it expected the French economy to grow by 1.1% in 2015 and 1.7% in 2016.

‘France has considerable economic assets, which have helped it maintain a high standard of living while keeping income inequality at low levels,’ Gurría said.

‘The economic recovery is underway, but unemployment is at high levels, and public finances remain weak, with chronic deficits and rising public debt. Achieving stronger, more inclusive, sustainable growth will require additional reforms that substantially improve the outlook for growth and job creation.’

The OECD said further labour market reforms should be ‘the top priority’. It said regulations on open-ended contracts held back labour mobility and created significant duality with workers on temporary contracts, in particular younger workers.

The government has been called to simplify and shorten layoff procedures, especially through reforms to the labour courts.

The report also recommended that the government lower public spending to allow tax cuts, especially on labour. Public spending in France represented around 57% of gross domestic product in 2014, among the highest levels in the OECD area.

Savings could be made through a rationalisation of spending and local government mandates and by holding down social spending on the health care, pension and unemployment insurance systems.

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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