France's Hollande has tight window to step up reform pace

Sun Jan 12, 2014 8:53am EST
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By Mark John and Jean-Baptiste Vey

PARIS (Reuters) - The coming weeks will tell whether Francois Hollande can pick up the pieces of his accident-prone presidency and start to pull the euro zone's second-largest economy out of decline. It may be his last chance to do so.

The new year could hardly have started worse for the French leader, who failed to keep a promise to the nation to halt the rise in unemployment by the end of 2013 and is now dealing with media allegations of a secret love affair.

Photos in a celebrity magazine published last week purporting to show a nocturnal visit by Hollande to a mistress risk stealing the show on Tuesday when he faces media for up to two hours in the traditional start-of-year news conference.

Hollande's office has complained of breach of privacy but issued no denial. Yet with polls showing most French are blase about his private life, the real question is whether he will use the media event to show he is ready to tackle the double burden on the French economy: rising taxes and public spending.

"As is often the case, there are good intentions. But we will judge the deeds," said analyst Bruno Cavalier at Paris-based Oddo Securities.

The Socialist Hollande, who in his 2012 election campaign labeled the world of finance his enemy, ignited speculation of a U-turn with a New Year's address to the nation offering business leaders a "responsibility pact" trading lower taxes and less red tape for company commitments to hire more staff.

Striking a new tone which has already raised hackles with unions, he also declared it was time to stamp out the abuses of France's generous welfare state, and cut public spending so as to create room for tax reductions after a series of rises.

Some see echoes of the about-turn made 30 years ago by Hollande's mentor Francois Mitterrand, who in 1983 halted a policy of nationalization and expansion of worker benefits just two years into his mandate as public finances crumbled.   Continued...

French President Francois Hollande wears protection for his ears as he watches a Mirage 2000-5 which taxis out of its hangar during a visit to the Creil military airbase as he presents New Year wishes to the French Army in Creil, near Paris, January 8, 2014. REUTERS/Philippe Wojazer