No shock therapy for French competitiveness says French PM Ayrault

Prime Minister Jean-Marc Ayrault said on Tuesday that a programme to restore French competitiveness would be spread over two to three years, rather than being a "shock" therapy.

Reuters/Philippe Wojazer

He was speaking ahead of what is expected to be a bad-tempered parliamentary debate on the 2013 budget

"The steps we will take will ease access to credit for businesses, boost their funds, improve their competitiveness and allow them to invest in innovation," Ayrault said.

Louis Gallois, a former head of European aerospace group EADS, had been commissioned by the Socialist government to deliver a report on how to boost
competitiveness.

He sparked union outrage by saying that France needed a "shock" reform and evoked the scrapping of social charges paid by employers by as much as 50 billion euros.

His idea was to shift a part of the tax burden on to workers, by increasing the so-called CSG levy which helps fund the social security system.

In a bid to soothe concerns voiced by leading unions, the prime minister said: "I think it is a programme that can be spread over two or three years" and he stressed it would not be a "shock" but more of a "holistic plan."

Gallois is due to submit his report on November 5, and it will then be examined by the government and a plan outlined, Ayrault said.

French President François Hollande is grappling with pre-election pledges to create jobs and spur growth while being forced to embrace austerity to plug a 37-billion-euro hole in public finances.

The objective which underpins the 2013 Ayrault budget is the government’s commitment to bring the deficit down to three percent of GDP, as required by the European Union.

The three-percent target is "imperative" with "national sovereignty at stake," Ayrault said.

To reach its deficit target, the government has introduced 24 billion euros in tax rises and more than 10 billion euros in spending cuts, though Ayrault maintains that lower and middle incomes will be spared the pain.

France last week ratified the EU fiscal pact which requires countries to cut debt and deficit levels to agreed targets as part of a plan to overcome the eurozone crisis.