Wednesday, May 9, 2007

 E-nough!:

 E-nough!: More skepticism regarding Sarkozy
 May 10, 2007
 More skepticism regarding Sarkozy

 No, indeed  (Related)  , Nicolas Sarkozy is no Margaret Thatcher. Thank you!

 But the 52-year-old Sarkozyto address a question posed repeatedly during the presidential campaignis not France's Margaret Thatcher. The economic program he has outlined so far would yield only modest improvement in growth and unemployment. To give the economy a real boost, Sarkozy would have to take aim at some of France's most sacred social protections. It's doubtful that most French people really want that. In fact it's not even clear that Sarkozy himself does (see BusinessWeek.com, 3/26/07, "French Elections: The Impact on Business").

 One big problem is France's rigid anti-layoff laws, which force employers to engage in long, expensive negotiations in order to downsize. That has discouraged employers from hiring, and has led in recent years to a surge in outsourcing of jobs. Another big problem is the ballooning cost of government-paid health and retirement benefits, which saddle employers with some of the heaviest payroll taxes in the world.

 Sarkozy is certainly aware of these problems. But despite prodding from the business community, he said little about them during the campaign. That's not surprising. The law that triggered last year's paralyzing strikes was a relatively mild plan to roll back anti-layoff protections for younger workers. Scaling back generous health and retirement protections would be politically explosive toonot just among Socialists and labor militantsbut also among the millions of voters who supported Sarkozy.

 Is Sarkozy planning to bide his time, hoping to enact incremental change and weaken the unions' grip before tackling more difficult reforms? That's anybody's guess.

 For now, France Inc. is giving him the benefit of the doubt. The leading French employers' group, known as the Medef, on May 7 hailed his election as "a new page being turned for France," a sentiment echoed in statements by other business groups.

 Investors reacted more cautiously, with the Paris stock market remaining flat on May 7, the first trading day after his victory. The market was rife with rumors, though, reflecting expectations that Sarkozy may exercise a dirigiste industrial policyas he did previously as Finance Minister when he orchestrated a state bailout of engineering giant Alstom.  A report by the Journal du Dimanche newspaper, for example, said Sarkozy might use France's stake in the European Aeronautics Defence & Space Co., the parent of troubled planemaker Airbus, to force a management shakeup.

 Posted by Carine at May 10, 2007 06:28 AM
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