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French government commissions 10-year action plan for reforms

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(Globalpost/GlobalPost)

By Catherine Bremer

PARIS (Reuters) - France's Socialist government has commissioned experts to produce a 10-year gameplan for overhauling areas such as public spending and education in keeping with its strategy of pursuing gentle, incremental reforms.

Responding to criticism that he has been slow to embark on structural changes and lacks a big-picture vision, President Francois Hollande wants ideas on his desk by year-end for sprucing up industry and slimming down the welfare state.

"The point of this is to leave behind the silo mentality we're in today and think more broadly," said Jean Pisani-Ferry, a prominent economist and scholar whom Hollande has appointed chief of a new economic policy planning body.

Building on a May labor reform and a pension bill headed to parliament in October, the aim is to link structural reforms in areas like education, housing and workplace training rather than looking at French problems in a piecemeal way, he said.

It will look in particular at France's competitiveness lag and assess the impact of a tax credit scheme for companies introduced late last year that Pisani-Ferry said had failed to reduce labor costs as much as the government had hoped.

"The European landscape is evolving very fast in terms of relative competitiveness," Pisani-Ferry said in a meeting with a small group of reporters. "France's problems have not been resolved by the measures taken so far."

He said the panel would bring in people from civil society as it looks at which industrial sectors should be invested in to match changes in global consumption as rich-world growth subsides and the developing-world middle class balloons.

Plagued with some of the lowest approval ratings of any modern French president, Hollande is under pressure to pull Europe's No. 2 economy out of stagnation but is restricted by a hostility to change in France that saw even his conservative predecessor, Nicolas Sarkozy, mostly shy away from bold reforms.

Surrounded on one side by liberal economic advisers and on the other by old-school leftists, Hollande has opted for a "softly-softly" style of nudging through changes with consensus from unions and employers that contrasts with Sarkozy's more forceful approach.

This tactic enabled Hollande to push through modest but meaningful changes to the labor code in May, whereas Sarkozy's one big reform to raise the retirement age from 60 to 62 in spite of union opposition sparked mass protests and strikes.

SMALL STEPS

Some economists worry that a fledgling economic recovery could take the pressure off Hollande to slash bloated public spending and thus ease some of the tax burden on companies.

The 10-year plan may also seek to take some of the focus off Hollande's short-term woes. He wants to deliver on a promise to reverse the jobless trend by year-end and faces a fight over tax rises and a reform to make people work longer for pensions.

The first stage of the exercise, getting government ministers to outline their ambitions for France in 2025, drew smirks from opposition politicians at their rose-tinted visions of full unemployment and burgeoning industry.

"It's a rather hackneyed communications ruse to make us think they are working," sniffed conservative lawmaker Eric Ciotti. "They basically prefer to talk about 2025 than their current disagreements."

In contrast, Pisani-Ferry's starting-point report states that France in 10 years will be "older, smaller and poorer."

France has shed 2 million industrial jobs over three decades as its manufacturing prowess has waned. Jobless claims hit an all-time record in June, even as Hollande repeated his pledge to cut the 10.8 percent unemployment rate by the end of the year.

A labor reform passed in May was aimed at encouraging hiring. But many companies say they feel too strangled by taxes and the uncertain economic climate to take on new staff.

"The big question is whether this strategy of reforming by small steps can work or not," a government adviser told Reuters.

"With this, at least, we want to get across the message that we are working for tomorrow at the same time as working for today," he said of the 10-year-plan.

While the Socialist Party's left wing is opposed to further loosening labor laws or slimming down the welfare model, surveys show public opinion has shifted in favor of reforms and signs of forward-planning may go down well with voters.

Prime Minister Jean-Marc Ayrault was in talks with unions on Monday to hammer out final terms of a pension reform aimed at reining in a ballooning deficit in the system.

Pisani-Ferry said Hollande would use the plan, which would contain detailed numerical objectives, as a basis for future reforms, especially in education where he noted emerging nations are leaping ahead in forming tomorrow's software engineers.

(This story was refiled to restore dropped words "areas such as" in first paragraph)

(Editing by Mark Heinrich)

http://www.globalpost.com/dispatch/news/thomson-reuters/130826/french-government-commissions-10-year-action-plan-reforms