The National Reform Program 2015
The French economy has many strengths, including its institutional framework, the top-rate infrastructure across its territory, its financial system, the quality of its workforce and its positive demographic trends, and its productivity per hour worked is one of the highest in the world. All those aspects are essential for its competitiveness and thus growth, both now and in the future. However, those unquestionable qualities cannot mask considerable economic challenge. France knows that it needs to address them; it continues, and will continue to undertake ambitious reforms, to create the conditions for a sustainable, fair and job-rich growth, in-line with the “Europe 2020” strategy. Moreover, the coordination of economic policies is absolutely necessary in a monetary union, and the aim of this national reform program is also to serve as a basis for debate in the framework of the European Semester.
France is therefore implementing a long-term reform strategy. The approach was deliberately chosen not to be a sharp break-away; on the contrary it involves generating momentum through that involves a series of targeted, coordinated and effective reforms that all have one ambition : modernizing, simplifying and freeing up economic activity, so that it can restart fully and sustainably. The public finances strategy, described in the stability programme, ensures that the public deficit back below 3% of GDP in 2017. The economic strategy detailed in the national reform programme is implemented rough determined efforts, especially as regards price competitiveness, with reduced employer contributions and taxes, as well as non-price competitiveness with simplification of administrative procedures, the repeal of unnecessary regulations that are a barrier to activity, support for investment and innovation, and improved functioning of the labour market. Above and beyond the strategy to restore business competitiveness, the government’s reform agenda includes two other priorities: combating inequality and preparing for the future.
The first results are already being felt. The current account deficit has been reduced, representing only 1,0 % of GDP as of 2014, while the rate of taxes and contributions paid by businesses began to fall the same year. The margin of businesses, for its part, is set to increase considerably in the first half of 2015 thanks to control of the cost of labour. And, after three years of stabilization, foreign direct investment decisions in France increased by 8% in 2014, which is a sign of improved attractiveness.
Overall, these reforms should strengthen the French economy’s potential and long-term resilience. In October 2014, the OECD assessed the impact of the reforms already undertaken at 3 GDP points in a 10 years’ time horizon. Once the reforms which will be undertaken by early 2016 are taken into account, ongoing assessment work suggests that the total impact should be at least around 4 GDP points by 2020, with significant effects on short-term potential growth.