Unemployment in France

Current scenario in France: The rise in unemployment to 10.2 percent, measured according to the International Labour Organisation's (ILO) criteria, comes as the euro zone's second-largest economy has posted three consecutive quarters of zero growth. Many economists predict unemployment, which stood at 10.0 percent in the first three months of the year, will continue to rise as companies seek to rebuild margins. A number of French companies have recently announced plans to layoff workers, including retailer Carrefour (CARR.PA) and car maker Peugeot (PEUP.PA). The headline figure, which includes unemployment in France's overseas territories, was France's highest unemployment rate since the third quarter of 1999. In mainland France, the number of unemployed rose by 52,000 from the first quarter to reach 2.785 million. Youth unemployment continued to climb in mainland France, with the rate reaching 22.7 percent for those aged from 15 to 24 years old, versus 22.4 percent in the first quarter, the INSEE national statistics office said. Tackling initiatives: With its approval ratings sliding, President Francois Hollande's Socialist government has fast-tracked plans to launch a scheme to create 150,000 state-subsidized jobs for young people, at a cost of around 2 billion euros this year and next. According to monthly figures published by the Labour Ministry, unemployment continued to rise in the third quarter, with August registering a 15th consecutive monthly increase in the number of people seeking work. Labour Minister Michel Sapin said on Sunday that the number of unemployed people had crossed the psychologically important threshold of 3 million in August.

Economic measures taken by government to boost economic growth in France:

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. France is pressing the EU to adopt a financial stability package to stem the eurozone crisis, believing negative market reaction to the 100bn bailout of Spains banks shows the need for more comprehensive action. Ahead of the EU summit due on June 28, Paris is set to propose a package of measures to put the European Central Bank in charge of bank supervision and to use the European Stability Mechanism, the new 500bn eurozone rescue fund due to come into force next month, to recapitalise banks directly.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. President Franois Hollandes new Socialist government has made clear that it regards agreement on urgent moves to tackle the eurozone debt crisis as the top priority. Germany, however, is opposed to the direct recapitalisation of banks. Officials in Berlin are seeking to play down any sense of urgency before the summit, believing that the tools already in place are adequate. Under last weekends agreement to rescue Spanish banks, aid from the European Financial Stability Facility, the existing rescue fund, and the ESM will be channelled via the Spanish state. Markets reacted badly, unhappy over the convergence of sovereign and banking debt risk and the lack of clarity over the bailouts terms. Look at the reaction to what was done for Spain. It doesnt fly, said one official. We have to have the proper tools to contain contagion. As a first step towards a banking union, Paris wants the ECB to assume responsibility for supervising systemically risky banks and their winding up in case of failure. The ECB would stress test the banks and the ESM would be the tool used if recapitalisation were required The ESM could only lend directly to banks if its board were to agree to change the rules unanimously, which is opposed by Berlin. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. French officials have long argued that the rescue fund should be given a banking licence so that it can leverage its capital and increase its firepower. This would require a change in the treaty establishing the fund which has yet to be ratified by a number of countries, including Germany. The case was supported by the previous centre-right government of Nicolas Sarkozy but vetoed by Berlin. Paris wants the issue put back on the table.

In September, Mr. Hollande laid out a budget that would produce the biggest cut in the public deficit in 30 years while raising the top rate for the wealthiest taxpayers to 75 percent. The budget is intended to reduce the annual deficit to 3 percent of gross domestic product in 2013, down from 4.5 percent this year, in line with promises both to Brussels and to the markets. It places heavy emphasis on new revenue, like increased corporate and personal taxes, while freezing total government spending. With the plan, Mr. Hollande was making it clear that France will stick to its promises of debt reduction, even with lower growth estimates, in order to keep the trust of the market that buys French bonds. He is doing so by raising taxes on corporations, the rich and the middle class and freezing public spending, though not cutting it. Spain and Italy have been under pressure from the markets, being forced to pay interest rates approaching 6 percent, but France has been treated as an exception, paying rates that are closer to Germanys 1 percent to 2 percent than to Italys. French businesses already worried about the competitiveness have complained about the tax increases. And conservative critics have argued that the Socialist government is simply putting off a day of reckoning with a bloated public sector that still accounts for 56 percent of G.D.P. At the time the budget was presented, business and consumer confidence was down, and there was no indication that the crisis has peaked. The economy had had three consecutive quarters of zero growth, which will not be helped by the higher taxes Mr. Hollande is proposing. And Mr. Hollandes personal

popularity is down sharply in the four months since he narrowly beat Nicolas Sarkozy to become the first French Socialist president since Franois Mitterrand. Mr. Hollandes problem is that in the middle of the euro crisis and flat growth, with pressure from Brussels and the markets, it is hard to live up to the hopes of his voters for the traditionally Socialist cure of higher public spending. Mr. Hollandes budget finds the extra $39 billion by raising French taxes still further, upsetting businessmen and the middle class. Some $13 billion will come from new taxes on corporations and another 10 billion from new income taxes, including a new higher rate of 45 percent on incomes over $193,000 and a controversial, largely symbolic and supposedly temporary wealth tax of 75 percent on earnings of over $1.3 million. Those higher taxes, too, have been criticized by business leaders as a large disincentive for talented people to work in France, criticisms echoed by the opposition centerright parties. Under the new budget, normal tax brackets will not rise with inflation. Capital gains will be taxed like ordinary income and various tax breaks will be removed, including a limit on the wealth tax. Another $13 billion is to come from a freeze in public spending with ministries required to make some cuts to keep the overall state budget the same, adjusting for inflation. Some departments will take a major hit, like Defense, in order to provide more money to keep campaign promises, for example, to hire more teachers and policemen. By this method, Mr. Hollande has argued, France is avoiding austerity and its impact on ordinary people, instead putting the burden on corporations and those who can best afford it But critics like economist Nicolas Baverez have argued that the Socialist government is simply putting off a day of reckoning with a bloated public sector that still accounts for 56 percent of G.D.P.

Five Months After Election, Bloom is off the (Socialist) Rose:

The symbol of the French Socialist Party is the rose, but the bloom was off five months after Mr. Hollande won the presidency, and the petals were blowing around. At the partys annual congress in Toulouse in October 2012, there was plenty of fighting among the various factions, and plenty of complaints directed at Mr. Hollande. Some felt that economic rigor had gone too far, and that the government should renege on its promises to European allies and the markets to get the budget deficit this year to 3 percent of gross domestic product. Others said that Mr. Hollandes decision to meet the target by raising taxes and freezing spending, rather than cutting it, would throw France into recession, even as growth, so far elusive, would by itself provide more tax receipts and jobs. The president was also questioned about his leadership. Mr. Hollande has tried to contrast his style with that of his predecessor, the hyperkinetic Nicolas Sarkozy, but the French, never happy, complain that Mr. Hollande seems somnolent in the face of the economic crisis. Then there were the opinion polls, which showed high dissatisfaction with Mr. Hollande. About 64 percent of the French said they were unhappy with his government, and only 10 percent believed the situation in France had improved since he took office, according to an OpinionWay poll in October 2012 for Le Figaro. Sixty-nine percent of those polled said they were unhappy with the failure to reduce unemployment, which was at a 13-year high, and 66 percent were unhappy with fiscal policy. Sixty-eight percent said

they thought Mr. Hollande did not know how to show authority, and 63 percent said he could not make difficult decisions.