PRESIDENT Francois Hollande has offered French companies what he called “a responsibility pact” to tackle unemployment under which they would reap the benefit of lower labour taxes in return for hiring more workers.
“It is based on a simple principle: lower labour charges and fewer restrictions on their activity in return for more hires and more dialogue with trade unions,” Mr Hollande said in a New Year’s address.
Mr Hollande did not specify how he would go about reducing labour charges but it is a possibility that has been mooted under a wide-ranging reform of taxes already promised by his socialist government for implementation during the remainder of his mandate through to 2017.
French corporate margins are among the lowest in Europe, partly due to the high labour charges needed to fund its generous welfare state.
Unemployment is stuck at around 11 per cent, although Mr Hollande – whose popularity ratings are at an all-time low for a president of France’s 55-year-old Fifth Republic – argues it has now hit a peak and is set on a downward curve.
“Of course the results are taking a while to appear, but they are there... I tell you again tonight: I have one priority, one goal, one commitment, and that is employment.”
Pollsters say Mr Hollande’s government runs the risk of a massive protest vote against it in European Parliament elections in May.
Earlier this week, the president caught the ire of French entrepreneurs with the legalisation of a “millionaire tax” on companies that pay salaries of more than 1m euros (£830,000).
Employers will have to pay a 50 per cent tax on the portion of any salaries exceeding 1m euros for 2013 and 2014, though the rate is effectively 75 per cent when considering other duties and charges.
The law will affect approximately 470 French companies, as well as a dozen football teams, to raise an estimated 210m euros (£174m)annually.