French PM Woos Business With Reform Promises: Critics Call It Old Wine in New Bottle

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By Kalyan Kumar | August 29, 2014 12:46 PM EST

The French Prime Minister Manuel Valls reached out to the business and industry on Thursday and assured them speedy reforms and tax cuts.

Mr Valls assured that the government would lower public deficit, though too much of it would constrain economic growth. Valls announced his recipe for economic growth as "supporting the business" and reiterated his support to Mr Hollande for his plan to cut 40 billion euros ($53 billion) in corporate tax and 50 billion euros in public spending.

Reuters
French President Francois Hollande (L) and his companion Valerie Trierweiler arrive for a state dinner at the Elysee Palace in Paris May 7, 2013, as part of Polish President Bronislaw Komorowski's two-day visit to France.

Mr Valls expressed confidence that the government would get a majority in parliament to vote for the 2015 budget and reforms will be pushed ahead despite opposition from rebel lawmakers.

Business leaders gave a standing ovation to the prime minister while the socialist left chastised the PM's statement, reported Yahoo News.

Banker Minister

France also managed to raise a lot of expectations from the business and investment sector by showcasing its new economic minister, Emmanuel Macron, who replaced the outspoken Arnaud Montebourg who was a bitter critic of Hollande's economic policies.  Macron is a former banker and a pro-business economist.

Deutsche Bank economist Gilles Moec hailed the articulation on reforms by the PM as clear cut, but was skeptical of action on it. He is seeing the cabinet reshuffle as a prelude to an impending succession war within the French left.

Business Confidence Down

Meanwhile, INSEE, France's statistics office, released new data that showed manufacturing sentiment in the country down to 96 as of August, from the 97 it was in July. This was the lowest in 13 months, and breached the long-run average of 100.

The European Commission also expressed its concerns about the economy of France and called on the second-largest economy of Europe to go ahead with reforms. The EC spokesman, Simon O'Connor, said it was crucial that the new French government articulate its reform commitments and re-launch the priority for growth and employment.

France in Hypochondria

Summing up the economic travails of France, Paul Krugman, in his blog for New York Times, observed that France is suffering from hypochondria. He described it as a delusion that leads one to assume that that it has certain illnesses, which in reality it does not. It is hypochondria that is leading France to accept quack cures and that is aggravating its distress.

 

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(Photo: Reuters / Thibault Camus)
French President Francois Hollande (L) and his companion Valerie Trierweiler arrive for a state dinner at the Elysee Palace in Paris May 7, 2013, as part of Polish President Bronislaw Komorowski's two-day visit to France.
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