After the apparent success of ‘Abenomics’ in Japan, it’s time to start talking ‘Hollandenomics’ in France, says Société Générale.
Reforms announced by President François Hollande in January represent a “radical policy shift” that will open “a new chapter in French economic policy”.
These include €30bn in cuts to employment taxes (funded by €50bn in public spending cuts) to encourage firms to hire more staff. Other measures should increase flexibility in France’s notoriously rigid labour markets and reduce pension liabilities.
It’s an ambitious programme, but one that stands a good chance of success, given that there is now a competent new prime minister with an experienced team, a clear majority for the government, and a growing awareness that France has no alternatives. “Implementation should be smooth.”
That may be optimistic, says Pierre Briançon on Breakingviews.com. Hollande’s “business-friendly policies are proving hard to sell – both to public opinion and [his own] Socialist party”.
Hollande’s personal poll ratings are poor, while local election results in March were ominous: the Socialists and their allies won just 38% of the vote, while the far-right Front National gained.
Now a test of the goverment’s commitment to pragmatic economic policies looms in the shape of a bid for engineering group Alstom by US firm General Electric.
The turbine and train maker is struggling and needs a large cash injection, so a tie-up with deep-pocketed GE would be a good solution. Yet the prospect of the maker of the iconic TGV train falling into foreign hands would be deeply unpopular given the Socialists’ “fetishistic attachment to industry”.
Given that Alstom was bailed out by taxpayers just ten years ago, a repeat performance would not bode well for Hollande’s ability and willingness to force through difficult decisions.