Francois Hollande makes drastic U-turn on tax cuts and welfare in bid to save presidency

President says he  is ready to axe the ‘excesses and abuses’ of France’s social model

François Hollande will try to relaunch his foundering presidency in the next 10 days with plans to cut public spending and reduce taxes – especially taxes on jobs and business.

The French President’s new approach, though vague so far, is being compared with the abrupt U-turn towards more market-driven policies enacted by his Socialist predecessor, François Mitterrand, during the Reagan-Thatcher era of the 1980s.

In a series of speeches, Mr Hollande will lay out the main lines of a policy to reduce the cost of labour and try to halt the slide in French industry. His new approach is described as an “acceleration” of the timid reforms undertaken since he was elected in 2012.

The policy has been welcomed by employers but castigated by unions and the left as a break from the President’s statist approach of the past 20 months. Until now, Mr Hollande’s government has been reducing the deficit with tax increases and modest spending cuts. He has tried to push back the rise in unemployment by projects such as job-creation schemes for the young.

The economy remains more sluggish than that of Britain or Germany. Unemployment has risen towards 11 per cent, despite Mr Hollande’s promise to reverse the tide by the end of last year. Manufacturing activity shrank in December, while increasing in the rest of Europe.

In his televised new year address, Mr Hollande offered a “responsibility pact” to employers. He said he would ease the high payroll taxes, or “social charges”, which inflate the cost of labour. In return, employers would be expected to promise to invest in France and to create new jobs.

Mr Hollande has a habit of making dramatic-sounding promises which become less dramatic when the small-print is revealed. Cutting, or shifting, payroll taxes which fund the €650bn welfare state would amount to a radical change in France’s social model.

Reductions in payroll social charges were promised, but never delivered, by Mr Hollande’s predecessors, Nicolas Sarkozy and Jacques Chirac. After payment of these charges, the average hourly labour cost in France is €35.50 (£29.45), compared with €32.50 (£26.96) in Germany.

Will the cost of the welfare state be reduced or the burden shifted on to other forms of taxation? No details have been offered so far. Mr Hollande said last week, however, that he was ready to “preserve” the French social model by taking an axe to its “excesses and abuses”, especially in health policy and family-support programmes. In his new year greetings to the government, he said he was ready to push through changes by “edict” rather than by legislation – implying that he is willing to short-circuit opposition from the left wing of his own majority if necessary.

In an interview with Le Monde, Pierre Gattaz, the president of the employers’ federation Medef, welcomed Mr Hollande’s new departure. He said employers could guarantee to create “a million” new jobs if social charges were cut, public spending was reduced and hiring and firing laws were “simplified”.

Trade unions and the left are waiting to see the small print of Mr Hollande’s ideas but they already accuse him of abandoning the “anti-finance” promises on which was elected. “Neither the state nor the employers’ federation can force businesses to create jobs,” said Jean-Claude Mailly, of the Force Ouvrière trades union federation.

Some political commentators have compared Mr Hollande’s change of direction with the U-turn in economic policy performed by President Mitterrand in 1983-4. After defying the monetarist zeitgeist for two years with nationalisations and improved welfare benefits, he was finally obliged by market pressure on the franc to adjust to the liberal winds from across the Channel and the Atlantic.

Bashing the French: the media hit back

France is a country of expensive milk and no money, according to a lurid article published by the US website Newsweek. The French press reacted to the piece, written by the Paris-based British journalist Janine di Giovanni, with undisguised delight on Monday. Le Monde said the article contained “an incredible number of factual errors”. Newsweek claimed, for instance, that a half-litre of milk in France cost “nearly four dollars” (around €3). The French supermarket price is nearly 10 times less at 72 cents a litre. French blogs were especially delighted with Ms di Giovanni’s assertion – stolen from George W Bush – that “the problem with the French is they have no word for entrepreneur”. Nor does France have a word for cliché.


Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
footballLive! Chelsea vs West Ham kicked off 10 Boxing Day matches, with Arsenal vs QPR closing the action
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Ashdown Group: Marketing Manager/Marketing Controller (Financial Services)

£70000 - £75000 per annum + benefits: Ashdown Group: Marketing Manager/Marketi...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all