Sarkozy to move fast on economic reform after poll victory

FE Team | Published: June 19, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

PARIS, June 18 (AFP): French President Nicolas Sarkozy, with a strong, if reduced, parliamentary majority in hand, plans to waste no time in rolling out his ambitious and contested programme of economic reforms.
Previous French governments of both left and right have tried to shake up the country's economy and rigid labour laws, and have repeatedly been forced to back down in the face of massive union-led street protests.
But with his convincing defeat of the Socialist Segolene Royal in last month's presidential vote, and his UMP party's victory in Sunday's final round of parliamentary polls, Sarkozy is now seen as having a clear mandate for change.
His hopes of steamrolling through his economic measures were, however, slightly dented when a predicted legislative landslide for the Union for a Popular Movement (UMP) failed to materialise.
It won a clear majority, with between 319 and 329 seats in the 577-seat national assembly, polling firm projections said. But the Socialists made a surprise comeback, increasing their current 149 seats to between 202 and 210 seats.
That result will likely give the Socialists a stronger hand when they battle against measures such as the UMP government's proposal to switch the financing of French health care from payroll charges to higher sales tax to help companies withstand international competition.
That plan led Sarkozy this week into his first big political storm since taking office when the Socialists accused him of aiming to finance tax breaks for the rich with money from ordinary workers.
Sarkozy says he wants to sweep away the structural constraints in the French economy which he believes have saddled the country with high unemployment, tepid growth and social discontent.
He begins the task with a special session of parliament from June 26 to August 10 to examine a tax and finance package designed to "shock" the economy back to life.
Drawn up by Prime Minister Francois Fillon, the tax and finance bill seeks to exempt overtime work from taxation, make mortgage interest payments tax deductible, all but eliminate inheritance tax, and put a 50-per cent cap on overall individual taxation.
By enabling people "to work more to earn more," Sarkozy's plan aims to drive up consumer spending, boost economic growth and make it possible to slash France's 8.2 per cent jobless rate, among the highest in the 13-nation eurozone.
But that strategy, which Fillon said would cost 11 billion euros (15 billion dollars), worries the European Union, which wants France to rein in its huge public deficit.
The key plank in the new bill is the proposal to exempt overtime work from taxes and social security charges, which are seen by many employers as a crippling disincentive to hire.
That would undermine the popular 35-hour work week introduced by a previous Socialist government, without taking the radical step of scrapping it entirely.
Deputies will also vote in July to kickstart the process of bringing in minimum service in transport during strikes-seen as a key test of Sarkozy's reform programme.