France's Hollande flags need to cut labor costs

Reuters News
Posted: Dec 20, 2013 4:42 AM
France's Hollande flags need to cut labor costs

BRUSSELS (Reuters) - President Francois Hollande said on Friday France needed to cut the high cost of labor in France to bring down stubbornly high unemployment in the euro zone's second-biggest economy.

His remarks came as a newspaper reported that Hollande's government was exploring possible measures to lower the cost of labor, which economists see as one of the main reasons France has lost competitiveness internationally in recent years.

While it remained unclear whether Hollande had any new measures in mind, Les Echos business daily said his government had asked a panel of experts to look into cost-lowering options, with a focus on welfare levies.

The Socialist leader is struggling to live up to a promise to get unemployment on a downward trend by the end of the year in the face of limp economic growth.

The INSEE official statistics agency forecast on Thursday that unemployment, which stood at 10.9 percent in the third quarter, was at best stabilizing before it was likely to tick up to 11.0 percent by mid-2014.

"Even if INSEE talks about a stabilization, I confirm that everything is being done to get unemployment falling," Hollande told a news conference in Brussels on the sidelines of an EU summit.

Hollande is counting on a state-sponsored job contract scheme to reduce unemployment, although many economists say that such measures will only have a temporary impact.

The president said for unemployment to keep falling over time France needed "a structural policy to ease the cost of labor and improve professional training".

His government has introduced a tax credit scheme aimed at reducing companies wage bill by 20 billion euros ($27.34 billion) annually, and employers and unions this month struck a deal on overhauling the costly and inefficient job training system. ($1 = 0.7316 euros)

(Reporting by Emmanuel Jarry; writing by Leigh Thomas; Editing by Brian Love and Elizabeth Piper)