IMF tells France to step up reforms, rein in spending

Tue Jun 4, 2013 7:25am EDT
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By Ingrid Melander

PARIS (Reuters) - France must lower labor costs, open up regulated professions, deepen its labor and business reforms and cease tax hikes to get back to growth and bolster competitiveness, the IMF said on Tuesday.

A day after slashing its growth forecast for Germany, the International Monetary Fund said that France was set to contract slightly more than its current forecast and that unemployment would keep rising in spite of the government's promise to reverse the jobless trend by year-end.

"The number of reforms initiated in the last six months speak well of the government's understanding that France needs to be reformed," the IMF's Mission Chief for France, Edward Gardner, said, adding: "It's a first step in a long process."

The Fund urged France to remove constraints on housing construction and push for more negotiations at enterprise level. It also suggested giving the competition authority more power to review all sectors of the economy and push to remove regulatory obstacles.

With rising youth unemployment a growing concern throughout Europe, the Fund said more instruments should be found to lower the effective cost of hiring young workers.

Gardner said that could include a lower minimum wage or more flexible contracts, an idea that has been fiercely opposed by young people and unions in the past.

Regarding structural reforms, the IMF stressed that France's focus should be on reining in public spending.

"Following three years of substantial fiscal adjustment, there is scope to moderate the pace of consolidation going forward, provided the effort is concentrated on expenditure and backed by continued structural reforms," it said in a regular review of France.   Continued...

A young girl sitting in a shopping trolley looks at schoolbags in a school stationery section at a supermarket in Nice August 23, 2012. EUTERS/Eric Gaillard