Tuesday, November 6, 2012

Gallois Report: "The Precautionary Principle Must Be Used For the Prevention or Reduction of Risks, Not to Paralyze Research"


Compact for the Competitiveness of French Industry

By Louis Gallois
Commissioner General for Investment

Report to the Prime Minister

November 5, 2012

Assistant Rapporteurs:
Clement Lubin,
Pierre-Emmanuel Thiard

[The following blog entry was translated from the original French language by ITSSD Advisory Board member Dr. Sorin Straja, who hosts the ITSSD Journal on Energy Security.]

The following paragraph appears on page 39 of the report:

"Nous ne voudrions pas clore ces développements sur la formation sans évoquer la culture
scientifique et technique. La formation initiale des jeunes doit, plus qu’elle ne le fait actuellement, les conduire à s’orienter vers les métiers de l’industrie. Nous avons vu que les formations techniques ont une image peu valorisée dans le secondaire. Les grands enjeux de la science sont insuffisamment explicités. La curiosité technique s’estompe. Plus grave encore, la notion même de progrès technique est trop souvent remise en cause à travers une interprétation extensive – sinon abusive – du principe de précaution et une description unilatérale des risques du progrès, et non plus de ses potentialités. Le principe de précaution doit servir à la prévention ou à la réduction des risques, non à paralyser la recherche ; il doit, au contraire, la stimuler. Fuir le progrès technique parce qu’il présente des risques nous expose à un bien plus grand risque : celui du déclin, par rapport à des sociétés émergentes qui font avec dynamisme le choix du progrès technique et scientifique, tout en n’étant pas plus aveugles que nous sur les nécessaires précautions."

[English Translation]:

" We would not want to close these developments on education and training without mentioning the scientific and technical culture. The initial training of young people should, more than it is  done currently, lead them towards industry trades. We have seen that in high-schools the technical training has an image of little value.  The key issues of science are insufficiently explained. Technical curiosity fades. More seriously, the very notion of technical progress is too often challenged through an interpretation that is extensive - if not even abusive - of the precautionary principle and a unilateral description of the risks of progress, but not also of its beneficial potential. The precautionary principle must be used for the prevention or reduction of risks, not to paralyze research; it must, on the contrary, encourage research. Rejecting the technical progress because it presents risks constitutes a far greater danger: that of the decline, compared with emerging countries that make in a dynamic way the choice of the technical and scientific progress, while being no more blind than us on the necessary precautions."

[Recent media accounts generally describing the contents of the Gallois Report make clear the seriousness of the obstacles faced by French industry and the economy at large, in part, due to insufficient commitment to scientific and technological research and aversion to risk.  This is the second time a report was delivered to a sitting French Government that has drawn the same conclusion: the precautionary principle impairs both scientific and technological innovation and economic growth when employed as a disguised barrier to trade and a reflexive luddite mechanism.]



Thirty billion to boost French industry

tuesday, november 6, 2012

This is the challenge of the Pact for Competitiveness of French industry, presented Monday by Louis Gallois government. François Hollande promises "tough decisions."

In its mission statement, the Prime Minister asked the General Commissioner for investment "to give a new impetus to the French industry " . The report therefore explores Welsh major axis 74 pages and 22 proposals. "The general idea is to give some leeway to the French industry relying on compulsory levies, said yesterday the former head of the SNCF and EADSIt is a clash of competitiveness is also a crisis of confidence. '
"Balloon oxygen" financial
Cost of shock: 30 billion euros of cuts in employers' social and, in a year or two to pay up to 3.5 times the minimum wage (approximately € 4,990).Louis Gallois proposes to fund a two-thirds increase in CSG about two points (between 20 and 22 billion), but also increases targeted VAT and financial transactions. Reduction of public expenditure should take "in the future, in part, the relay of taxation" . Health insurance and family allowances could also be tapped.
With this "lifeline" financial state would create an environment conducive to the development of three priority areas: enabling technologies, health and economy of living, energy transition. Research, innovation and the emergence of intermediate sized companies, missing the French industry would be encouraged based on groups of French international. The investment would be supported by the doubling of the capacity of financing public investment Bank (BPI), through public-private partnerships, and the orientation of private savings to industry (longer contracts life insurance).
Welsh final installment plan: transfer the financing of social protection to continue to reduce taxes for companies to renegotiate the conditions of access to the labor market and training (paid employment and precarious) to create a new pact social or "pact productive" .
Frédérique Jourdaa.



Pact for competitiveness of French industry

Ex-Pd-g SNCF and EADS Louis Gallois presented Monday, November 5th Prime Minister Jean-Marc Ayrault its long-awaited report on a "pact for competitiveness of French industry." There are 22 proposals formula sales and 30 billion euros the amount of effort required to turn the economy hexagonal, 20 billion decline in employer contributions and $ 10 billion for employee contributions, all funded by VAT, CSG, green taxation, as well as the decline in public spending.

Among its 22 proposals, he mentions in particular the commitment of the State not to modify certain provisions relating to companies (research tax credit, devices called "Dutreil" promoting the detention and transfer of businesses, steps towards the investment in SMEs ...), the role of employees in corporate board, creating a shock competitiveness (name rejected by the government), the revival of research on shale gas (also rejected) the alignment conditions of export credit and guarantees the highest level found in other developed countries, an effort in research, creation, within the BPI, a product consisting of preferred shares without Voting for growing businesses, the establishment of a "Small Business Act" for SMEs, increased effort in training, the lengthening of life insurance contracts by adapting their diet tax and benefit contracts accounting units (shares) and contracts diversified compared to euro (mainly bonds)...


Louis Gallois advocates 30 billion euros of cuts costs

PARIS (Reuters) - Louis Gallois proposes lowering social security contributions of 30 billion euros to halt the decline of French industry, in a report to the government on Monday, the eve of the announcement of the first measures of competitiveness .
The ex-CEO of EADS and SNCF suggests transferring 20 billion in employer contributions and employee contributions 10 billion, up 3.5 minimum wage, taxation (VAT, CSG, carbon tax, taxation estate, niches, etc.)..
"I propose 22 key measures (...) to stop the slide, stop stalling, support investment," he told reporters. "This is what I call (...) the impact of competitiveness, which is in fact a crisis of confidence."
According to the Minister of Economy, Pierre Moscovici, the report "we will apply very widely." President François Hollande has meanwhile promised "tough decisions" oriented primarily on employment.
The government is still far away from a massive transfer of social contributions to taxes, to protect household consumption and therefore growth.
"I've always said that the French economy did not need a trauma, but a therapy of deep tissue therapy, therapy over time," said Pierre Moscovici on BFM TV.
An effort of 30 billion euros in fiscal consolidation is already scheduled for 2013, "we must also bear in mind the purchasing power of households," he added, promising measures to lower the cost of labor, without precision.
Louis Gallois argues that this transfer is made on a year or two "if fiscal constraints or the desire to limit the impact on the household demand imposed", but no more so as not to dilute its effects.
The government is being delivered against an increase in the standard rate of VAT, the bulk of the effort (about two-thirds, or 20 to 22 billion) will be financed by an increase in CSG, said he.
According to the website of the weekly Le Point, the government, which will meet on Tuesday at a seminar on the subject, consider using a tax credit to reduce the burden on businesses of twenty billion.
Point also believes that it would be ready to return part of its decision not to increase the standard rate of VAT, which may be increased from 19.6% to 20% in 2013.
"I do not comment on rumors or leaks," said Pierre Moscovici. Minister for Relief productive, Arnaud Montebourg: "The decisions are not finalized. We will make tomorrow. We are working on all the assumptions."
Louis Gallois diagnosis from a severe drop accelerated French industry, whose share in the value added of the French economy fell to 12.5% ​​in 2011, which places France in 15th area euro.
"The French industry has now reached a critical threshold beyond which it is threatened with disintegration," he wrote.
He stressed that the decline 10000000000 employee contributions limit the impact of an increase in the CSG on the purchasing power of employees. In any case, it refers to the consultation on the financing of social protection arrangements that transfer.
He also believes that reducing public spending will eventually take over for a share of taxes.
Advancing the figure of 30 billion, or half of the margin loss of French companies since 2001, he said he wanted to combine both a "critical mass" of economic constraints and "absorption system tax within a short time. "
In his mind, if the decline in payroll must provide a "lifeline" for businesses, it should be clearly oriented investment and innovation, not to the distribution of dividends or salary increases.
To facilitate the flow, it also offers a limited reduction of corporate income tax for reinvested earnings and taxation of share buybacks, which according to him is that dividend distributions "disguised".
It suggests measures to stabilize the legal and tax rules, to improve relations between large firms and subcontractors and support for innovation and further research on techniques for exploiting shale gas.
It also offers improved corporate governance, such as the automatic granting of double voting rights to shareholders holding their shares at least two years.
To meet capital requirements of midsize (ETI), he advocates including the creation, within the new Public Investment Bank (BPI) shares without voting rights but better paid.
This report was supported by the right-wing opposition and has been criticized by the Communist Party, while employers' organizations invited the government to act quickly.

Sunday, October 24, 2010

Attali Commission: "France Must Strictly Circumscribe Precautionary Principle to Promote Entrepreneurial Risk-Taking, Innovation & Economic Growth"

An ambition for ten years - Report of the Committee for the Liberation of growth chaired by Jacques Attali

Jacques Attali ,
FRANCE. Presidency of the Republic, FRANCE. Prime Minister

Paris: XO Editions: French documentation

October 2010

Appointed in August 2007, the Commission headed by Jacques Attali was charged to "examine the conditions for the liberation of the French economic growth". This report follows the first report released in January 2008 (http://www.ladocumentationfrancaise.fr/rapports-publics/084000041/index.shtml).

[SEE: Sarkozy Claims to Back Attali Commission's Liberalization Plan: But Rejects Recommendation to Scrap Precautionary Principle!, ITSSD JOURNAL ON DISGUISED TRADE BARRIERS (Jan. 25, 2008) at: http://itssddisguisedtradebarriers.blogspot.com/2008/01/sarkozy-claims-to-back-attali.html; French Rethinking the Precautionary Principle?? Jamais!!!, ITSSD JOURNAL ON DISGUISED TRADE BARRIERS (Jan. 25, 2008) at: http://itssddisguisedtradebarriers.blogspot.com/2008/01/french-rethinking-precautionary.html ].

This report proposes a strategy for ten years. This strategy identifies two emergencies: the recovery of public finances (the deficit should be rapidly reduced to 3% of GDP and public debt should be reduced in 2020 to an amount of about 60% of GDP) and employment (to lower the overall unemployment rate to 4.5%; "unlock" youth access to employment; reduce the dualism of the labor market between permanent and temporary jobs). It also defines two long-term priorities: education and management of major growth areas including the environment, natural resources and major infrastructure.


The protection of the environment and the management of scarce resources

To grow, France must invest much more than it does in sustainable development, preserve its environment and implement a integrated strategy for managing scarce resources.

From this perspective, our country must take action in three directions:

establish proper ecological pricing by implementing a carbon tax, if possible at the European level. Proper pricing is indispensable in guiding consumer choice and improving the profitability of long-term investments in the environment;

prepare the country for the rising cost of raw materials. And for this, in particular, secure Europe’s access to energy by enhancing the domestic energy market, developing renewable energy sources and cross-border infrastructure, adapting energy pricing so as to maintain the capacity to produce the energy needed, and increasing the involvement of the European Union in international negotiations regarding the regulation of raw materials. In particular, France must secure the conditions required to fund the renewal of its nuclear capacity and acquire the means to develop a strategy for the control of vital raw materials;

make better use of our strengths in the management scarce resources: above and beyond our established positions in the fields of water, of energy, of waste, France must re-establish agriculture at the center of the growth strategy, by emphasizing the innovation and research. It must also launch a proper policy of the sea by developing our ports and by intensifying the exploration of sea-beds.

In addition, the proposals of our first report that have not yet implemented, in particular on the innovation and competitiveness, remain fully relevant.

All leaders and decision makers of this country must be convinced of the magnitude of the upheavals required to maintain and modernize our social model, conceived during the Resistance, implemented at the Liberation, deployed during the "Thirty glorious [years]" and abundantly invoked since the first oil shock.

All of our proposals constitute an ambition for ten years. It requires, in order to succeed, radical changes in the organization of the government and the relationship to risk and to democracy. It can be implemented only if it meets social consensus. To achieve this, we are hoping, through this report, to open up a great debate in the country leading to a general mobilization. This debate requires the involvement of a maximum number of political, economic, social and cultural actors.

We are fully aware of the difficulties inherent in these transformations:

• The government lacks the tools for action, since it has gradually relinquished control in favor of Europe, the private sector, the local collectivities and the social dialogue; although these developments may be welcome in principle, they pose real problems regarding the coherence of public action;
• The social partners have not really discussed common strategies regarding the long-term objectives. In particular, they have not debated the debt reduction, the environment and fight against illiteracy.
Special interests may oppose particular reforms which are motivated by considerations of the common interest alone.

To make possible the changes described above, the Commission proposes to act in four directions:

Reform the political institutions, so that they make it easier for the government to act: to achieve this it is necessary to clarify the institutional responsibilities that are currently too entangled among the government, territorial collectivities and social protection agencies. It is necessary to establish a budgetary rule for return to equilibrium and to ensure that the Parliament ratifies the budgetary stability program. Public policy must also be systematically subjected to independent evaluations, with real consequences in terms of public spending.
Promote the risk willingness. Growth means taking risks. Zero risk leads to zero success. The innovation must be favored and assumed; the precautionary principle must be strictly circumscribed. In particular, this requires encouragements for research and the entrepreneurial spirit, a fair pricing for the scarce resources, incentives for the public agents to the reduction of the public deficits, and a more inciting financing of social programs - with a bonus-malus system.

Mobilize the whole French society in favor of its young people. The generations now in power must perform a massive reorientation of public choices to build a society in which future generations will be able to grow, and in particular to find more easily interesting jobs and good quality housing. This requires the systematic assessment of each proposed public decision according to a simple criterion: “Is this project useful for future generations or, just the opposite, it compromises their future?”

Develop a shared European – and notably Franco-German – ambition.… (pp. 21-23)

A lack of competitiveness

The lack of productivity gains cannot contain rising production costs arising from the evolution of wages, and therefore hinders the competitiveness of the European countries. This situation has deteriorated globally since the early 2000s except for Germany which achieved to maintain competitiveness better than its partners by limiting wage increases.

The productivity gap is particularly rooted in the relative paucity of research and innovation. More reasons for this situation:

A high risk aversion

Risk aversion translates into a demand for strong (both social and economic) protection addressed to the community. This takes the form of support and help programs that are increasingly expensive for the past projects at the expense of the future endeavors.

Other symptoms are unmistakable: the number of entrepreneurs who choose not to grow their businesses; preference of investors and regulators for risk-free assets which do not fund growth; the high precautionary savings of the households; preference for the retention of the present employment, which blocks the reallocation of employment towards more productive and innovative businesses.

These features are exacerbated by an extensive application of the precautionary principle, contrary to the constitutional text, which covers in everyone's mind a growing number of areas, and sterilizes creativity and risk-taking which are essential for growth.

The lack of innovation and upgrading intellectual creation

While the production moves to countries with low workforce costs, the competitiveness of companies in developed countries relies increasingly on innovation. In France, the effort for the research of the private sector is greater than that of China and the European average, but below the average of OECD countries, and especially the United States and Germany. In addition, the contribution of Research and Development (R & D) to GDP grew less rapidly than in other OECD countries. (pp.34-35)

Preservation of the environment and management of scarce resources

In a mature economy, the growth is no more driven by logics of catching up but by innovation. Innovation is ultimately the only real source of productivity gains, of growth and of purchasing power. It is the result of a complex alchemy and it is not restricted only to the quality of public or private research. Innovative economies are characterized by:

A willingness to take risks shared by the entrepreneurs and the society. In particular, this risk willingness requires clearly circumscribing the precautionary principle in order to avoid that the inaccuracies that surround the language of the constitutional text do not lead to the paralysis, to the stagnation and to the blocking of the innovation in an increasing number of domains1. The zero-risk indeed leads to zero growth;

Acceptance of the process of creative destruction. This implies a high degree of competition in the markets for goods of large consumption, the innovation coming from new businesses as much as from established businesses. It also involves accepting, anticipating and accompanying the changes of employment and trades implied by the technological changes.

A strong industrial policy, based on the development of small and medium size businesses, vital pool of jobs and of innovation. As such, it must assist them in conquering new markets by giving them the necessary foundation in the European market, specifically by access to public markets in the context a European Small Business Act, and it must pursue vigorously the reduction of administrative burdens weighing on them while developing their access to their own funds. The first report's proposals are fully relevant. This industrial policy must also use the potentials of the European trade policy that must be more based on the principle of reciprocity. (pp. 149-150)
1. See report on the evaluation of Article 5 of the environmental charter of the Evaluation Committee and Control of Public Policy at the National Assembly (June 2010). If it finds no significant impact on research (with the notable exception of biotechnology research), it calls to consider a possible modification of Article 5, including citing the desirability of its repeal, and clarification of the procedures for implementation of the principle to ensure that it is understood and used as a principle of action allowing an efficient and proportionate risk management.

Re-establish the agriculture and the food industries at the center of the French growth strategy

To emphasize on innovation and research

This requires returning to the original meaning of the principle of precaution, which is a principle of action, and thus to clarify its modalities of implementation.
Moreover, the innovation must enable the agriculture to ensure its sustainable development:

• By improving the competitiveness of production chains, and by preparing a lower sensitivity of the farms to the future rising cost of raw materials (oil, fertilizer, but also feed for cattle knowing that Europe is woefully deficient in plant proteins);

• By promoting the resilience of the agriculture to the disasters and climate changes and by encouraging a better carbon balance for farming and forestry;

By diversifying the uses of renewable carbon from agriculture and forestry to materials, energy and chemistry. In fact, the renewable carbon from the plants will replace a portion of carbon derived from oil (50% in the USA by 2050, 35% in Europe by 2030 and 17% in France by 2017). Global growth of plant chemistry is 50% per year. All industrial sectors are affected: bio-fuels, chemical intermediates, plastics, packaging, constructions, and cosmetics. To achieve this revolution, we must implement a new procurement system and transformation of agricultural production.

France has many players in the field of plant chemistry, businesses, research institutions, clusters of competitiveness. It is about strengthening the position of France in the global competition. (p.157)

To lead and make a success of the changes
[…] To create the conditions for these changes, it is necessary to:

promote risk willingness. The search for zero risk leads to zero success. The innovation should be promoted and welcomed; the risk-taking must be paid; the precautionary principle must be strictly circumscribed. Our public policies must create incentives so that everyone has interest to act in the favor of growth, debt reduction, full employment and the environment;
Transformations of the public governance and control of public finances
If the record on implementation of the Commission’s proposals on Governance is very mixed, it is possible to identify four areas that have seen real progress […].

The main proposals for reform of governance of political and administrative system are dormant and in particular those concerning […]

Finally, the significant degradation of our public finances, partly due to the crisis, is in contrast with the Commission’s proposals to reduce by 1% per year the GDP share of the public expenditures. Indeed, the crisis, whose effect was reflected by lower tax revenues and increased public spending, has led to a sharp aggravation of the public deficit and debt. The French public deficit rose from 3.3% in 2008 to 7.5% in 2009; the public debt has, meanwhile, rose from 67.5% to 78.1% of the GDP between 2008 and 2009.

This increase in public liability has not been offset by an increase in private assets of long term and, contrary to the recommendations of the Commission, the taxation savings has not been the major reform needed to encourage riskier and longer term investments. France is still characterized by a rate of household savings particularly high but insufficiently oriented towards long-term financing of our economy.

Finally, the focus on the theme of sustainable development over the past two years has not been accompanied by the major counterpart advocated by the Commission through the reform of the writing of the precautionary principle in the Constitution in order to prevent its utilization as a pretext to curb risk-taking. (pp. 175-177)

The 42 members of the Commission for the liberation of growth

The direction of the future

First, the seriousness of the offense. Globalization, technology and aging would have forced France to adapt long ago. Far too little has been done while the crisis is now strengthening its dangers. The country is lagging behind in competitiveness, is suffering of growth failure, persistent unemployment, explosive debt, and it still seeks for the place it may take over the long term in the global division of labor among China, the United States and Germany. The “trend scenario” that our report draws is that of the decline.

To stop it goes through two emergency measures: the restoration of public accounts and the absolute priority given to stimulating employment.

But this will not be enough. The non-adaptation of the French model, despite its soaring costs has led the welfare state to no longer meet the legitimate needs expected from the government: to protect the citizens, to treat, to educate, to support the poor, to fund their retirement. This failure has led France to shrink at the time of the major upheavals that require action. The French, as panicked, lock themselves into the fear of the future, into the obsession of downgrading, and into the paralysis of distrust.

If France does not regain the confidence, the risk appetite, the desire to invest, if by principle it prefers the precaution to the adventure, it loses all chances that are yet still numerous.

But the country will obtain this revival only at the cost of a complete overhaul of its welfare state, of its educational system, of its social protection, of its attitude with respect to its businesses and their competitiveness and with respect to the overall financing of the economy.

These reforms, which we call "major programs," require time to be implemented, but only they will make again everyone to share the sentiment of living in a country where the government is effective and where the social justice is ensured. Only they will legitimize again the public policy over which hover today all suspicions. The emergency measures themselves, regarding the debt and the employment, shall be admitted only if they fall into this category.

"For the future generations." The title of our report is mainly a method: Young people are the victims of past inaction. Giving them a place, means to change completely the course of politics, means to position France in the direction of the future. (pp. 211, 228)

A major crisis is sweeping through the developed countries. It hit France at a time when our country was far from having implemented the changes needed to put us back on the path to sustainable growth.

Other profound transformations – economic, financial, social and political – are shaking the world. They have implications for every household in France, every business, every institution. Technological and cultural changes are almost daily revolutionizing our lifestyles and challenging the structures of power.

Our country must retain its position in the face of these great changes. Our children, and future generations must be able to create a prosperous economy in which they can safeguard the cohesion of our society and influence developments in the wider world around them.

For this to happen our country needs to implement the package of reforms set out in our initial report, almost two thirds of which have now been fully or partially set in motion. And the upheavals of the past two years now require prioritized action on a limited number of urgent issues.

The recommendations of this second report therefore clarify the proposals in our first report, and put them in an order of priority, in the light of the new imperatives.
We propose a strategy for change over the next ten years as a basis for all reforms that must be carried out by any government, whatever its political orientation, independently of any other reforms that particular governments may choose to make in the light of their specific political choices. Our aim is to give our children the chance to make collective choices freely in the future.

This framework is grounded in respect for three fundamental needs:

the need for truth: France is in a difficult situation, with falling competitiveness, problems retaining its young people, scientists and entrepreneurs, debt, unemployment and insecurity. The country must understand the scale of these realities and acknowledge their implications. It must also recognize its own strengths, which are considerable. France has a growing population, compared to our European partners; it remains dynamic, with large transnational industrial groups and innovative SMEs; it has creative scientists, mathematicians, engineers, executives, artists, artisans and workers; it is a socially dynamic country thanks to its population’s capacity to adapt; it is attractive to investors; its growth outstripped that of Germany by an annual average of almost one point over the last ten years;

• the need for fairness: the efforts required from our country are on a scale unparalleled in peace-time. The concerted and determined action required from those in power cannot succeed unless it is seen as legitimate by everyone. Everyone needs to feel that this effort is shared fairly and that there are real opportunities for social mobility. Here again, France has many strengths. With a social security system that is unique in the world, and despite the difficulties caused by the current crisis, we are one of the least inegalitarian developed countries both in terms of income differentials and wealth distribution1, a country where the incidence of poverty among senior citizens is in constant decline;

• the need for legitimacy: to reform the country, we must have effective public governance, clear responsibilities for state bodies, real-time monitoring of reforms and evaluation of their implementation. Here again, despite the doubts many of our compatriots may sometimes have about the poor functioning of our institutions, France has many strengths, with a very lively democracy and an extremely active civil society.

1. The richest 10% control 38% of the wealth in France, as opposed to 54% in Germany, 58% in Sweden and 71% in the USA (Source: OECD – Growing Unequal? Income Distribution and Poverty in OECD Countries, 2008).
A return to economic growth is necessary and possible.
Without new policies to stimulate employment and balance public finances, growth will remain very weak and our society will soon find itself in an economic, financial, ecological and social impasse -and hence in a political one too.

The combination of an aging population and an imbalance in our public finances places France on a very dangerous slippery slope of growing debt and loss of competitiveness. Unless the public finances are very quickly put in order, the national debt will rise far beyond 100% of GDP by 2020, even before the impact of pensions is taken into account. Long before it reaches this point it will bring about a decline in the living standards of every French citizen, concentrate a growing proportion of tax receipts on financing the debt to the detriment of public services, and will make recovery impossible.

Potential growth in France, currently around 1.5%, would further reduce, triggering a vicious circle of more debt, less growth, fewer jobs, more injustice, a growing deficit and more debt.

So a new strategy for growth is vital. This growth must be reoriented and socially and ecologically more sustainable. More growth, different growth, growth for all. This new strategy is possible. France is capable of achieving an average economic growth of at least 2.5% of GDP year on year to 2020.This assumes productivity gains of 2% per year generating a reduction in structural unemployment to 4.5% of the active population. The experience of many of our neighbors shows that this is possible. The current situation in France and the desire of all French citizens to make the efforts necessary to live better show that the transformations needed to achieve it are within our reach.

The France we want to see in 2020

Our Commission seeks to speak in the name of future generations and to defend their interests. The France we want to see must therefore give priority to its young people in any action undertaken by the state.

Our ambition for France is not only to see our country come through the current crisis, but for all French citizens to fulfill their individual potential and have the best opportunities for themselves and their children. Our ambition is for our economy to be more competitive, our society more free, confident and secure and for the country to obtain the maximum benefit from global growth.

France can and should build a society open to innovators, entrepreneurs, social activists, creators and investors. We do not want a France in which the privileged few focus on their private incomes. Our country must foster internal and external mobility. It must foster an active civil society as a precondition of democracy, quality of life and the reorientation of growth. France must be welcoming to those who want to contribute to its growth through their own work.

• France can and must build a more just and mobile society, particularly for the new generations, by drastically reducing the dropout rate in education and facilitating social mobility by rewarding work with success.
Achievement of these goals requires a new financially and socially sustainable growth strategy

To achieve these goals we have identified the key points of the necessary reforms, the fundamental conditions for growth, and the top priorities in relation to the reforms in our earlier report, which nevertheless remain important.

We propose a ten-year strategy based on:

• two immediate imperatives: debt reduction, to prevent the tragedy of a loss of sovereignty, and jobs, to end the scandal of mass unemployment, notably among the young;

• two long term priorities: education and the management of the major growth sectors, including the environment, natural resources and major infrastructure.

We do not want our legacy to future generations to be a France crumbling under a mountain of debt and unfunded pensions. On the contrary, we want to leave them a sovereign France, independent of international creditors, free to conduct its own policies and with sufficient fiscal resources to implement government programs. To achieve this we believe it is absolutely necessary – and possible – to reduce government debt to around 60% of GDP by the end of the current decade. This is our top priority. No growth without debt reduction, no debt reduction without growth.

We do not accept the inevitability of mass unemployment, or a youth unemployment rate of over 20%. This is an obstacle to growth, an injustice and a waste. We want a society of full employment. This is our second priority.

We do not want a France with diminishing levels of education, as is currently the case, particularly in primary education. This drop is an obstacle to growth in a globalized, knowledge-based economy. Primary education must be overhauled. This is our first long-term project.

We do not want to leave future generations with environmental degradation, inadequate infrastructure and a society unprepared for dwindling supplies of oil and many other environmental resources. This is our second major long-term project.

Regain control of our public finances as the basis of growth and social cohesion

First and foremost, in the name of inter-generational fairness and the preservation of the future for generations to come, France must seek to balance its books and reduce public debt to around 60% of GDP by 2020.

The priority must be to reduce the government deficit below 3% of GDP as soon as possible, in other words in 2013.

The French stability program, which seeks to bring the deficit below 3% by the end of the period, must be respected. To succeed, for an annual GDP growth of 2%, the effort needed in comparison to the spontaneous development of the public finances is 25bn euros per year, a total of 75bn euros between now and 2013. This considerable adjustment could be obtained through spending cuts – of 50bn euros – and growth in the tax base and receipts from social contributions, in other words a tax increase – representing 25bn euros.

Spending cuts must be a clear priority (50bn euros over three years). It is possible to reduce spending without causing deterioration in the service provided. A proportion of public spending reflects the proliferation of administrative grades and quangos, insufficient use of electronic media and outdated management practices in public institutions such as universities and hospitals. In addition, some budgetary or fiscal spending corresponds to a private income received by certain social groups and professions. International experience shows that when spending cuts are prioritized in budgetary reform, stability is generally more durable.

Spending cuts will not be enough and it is also necessary to increase the tax base and social contributions receipts (25bn euros in three years). In practice the programs for budgetary adjustment implemented in developed countries have all acted both to reduce spending and to increase revenue. In particular, it is important to reduce or abolish tax breaks and welfare loopholes that have anti-redistributive effects or favor the more privileged, such as tax allowances on savings and tax-exempt capital gains. This means effectively raising taxes. For reasons of fairness it is also important to look again at inheritance tax. None of these tax rises will include any tax shield.

The plan for budgetary reform that we propose is:

• realistic: it will not lead to a reduction in the overall level of public spending, but only to a reduction of its rise;

• fair: this plan protects the spending power of the poorest in society and protects future generations;

balanced: it preserves all the underlying elements of the welfare state and shares the burden of the efforts to be made between central government, local authorities and social security.

If the predicted necessary growth does not take place by mid-2011, the return to a government deficit of 3% of GDP in 2013 will require an acceleration of the reforms set out in the rest of this report, by means of additional measures. Otherwise it will have to be delayed. These measures should be discussed with representatives of local authorities and social partners in France, whose support for the debt reduction strategy is crucial. The measures should also be coordinated with those of our European partners, notably Germany.

Beyond 2013, continued debt reduction requires continued, far-reaching modernization of our institutions in a perspective of fairness and sustainability, and the reform of budgetary rules.

To reach debt levels of around 60% in order to preserve the foundations of our welfare state, it will be necessary, throughout the decade, to maintain efforts to increase the efficiency of public services and budgetary control, notably through the computerization of the public services. This also requires the identification of a new institutional framework for preparing and monitoring budgets.

Every effort must be made to modernize social protection, while preserving its universality. The administrative system needs to become more effective and better attuned to those that need it, encouraging professional mobility by reducing status differences. This notably involves giving a greater role to private health insurance and compulsory supplementary health insurance, and undertaking far-reaching reform of housing policy, which would have at its heart the welfare of the resident.

Everything must also be done to make the tax system fairer and more effective. This requires a more progressive tax system, based on better final remuneration for work and creativity, counterbalanced by new resources focusing on three areas: environmental degradation, consumption and personal wealth.

This readjustment of public finances to favor growth must be able to rely on the support of a strong Europe, which will assist states in reducing their debt while strengthening their collective capacity to invest in future spending. France must therefore work to strengthen the Stability and Growth Pact, develop European public funding for research and innovation, notably through the establishment of Europe-wide risk capital funds for SMEs and patent funds, and by encouraging long-term private investment through the establishment of an appropriate accounting, prudential and regulatory framework.

To create jobs and give young people a future

The second priority relates to jobs, notably jobs for young people. Employment is a factor for growth. It is also a consequence of growth.

Firstly, everything that makes businesses more competitive is good for jobs. To this end our Commission recommends retaining most of the reductions in charges and transferring an element of social charges to VAT. The development of competition, particularly in the services sector (telecommunications, banks and insurance, energy, etc.) is also a useful spur to innovation and job creation in areas of unsatisfied demand.

We also propose action in three directions.

The creation of an effective, coherent and empowering framework for job-seekers through the establishment of a development contract. This is a major reform. Its starting point is the observation that the job-seeking process is useful for both the unemployed person and the wider community. It therefore deserves to be remunerated and organized through an activity contract for an open period, providing payment for the activity of seeking work or training. Beneficiaries will be offered personal mentoring. In the longer term this contract is intended to become the standard offer of the public employment service in France and will be offered to all jobseekers. It will take different forms depending on how long the beneficiary has been out of work. It will enable significant reductions in the duration of unemployment and extend the duration of employment. It will be funded by a redeployment of spending on employment and training policies.

The use of vocational training to secure transitions between jobs. This would require fundamental changes to its functioning to make it more effective. In addition to the recently established national Fonds paritaire de sécurisation des parcours professionnels [a fund to support retraining initiatives], the training system needs to be made more effective through the creation of regional funds so that resources can be pooled and shared more effectively within localities for the benefit of jobseekers.

The reduction of insecurity in the job market, which makes employers and employees risk-averse and causes talents to go to waste. To encourage contracts of longer average duration, we propose that unemployment insurance contributions should vary according to the duration of the employment contract and that the social partners be given the task of drawing up an employment contract with progressive rights.

In addition, to put an end to the ‘French exception’ of very high youth unemployment, two actions must be developed:

• the reinforcement of initial work-based training as a priority for those with the lowest levels of qualification: apprenticeships, which have been successful in higher education, must be extended to training at a level at or below the 18+ highs school diploma. One solution would be to give businesses the opportunity to pre-recruit young people and fund their training in exchange for a commitment from the beneficiaries to remain in employment with that company for a minimum period (3-5 years);

• the reinforcement of training after an initial period of work: movement back and forth between professional careers and training at a basic level should be encouraged by developing specially-adapted university courses and ensuring that young people have sufficient resources.


To guarantee an education for our children, from nursery to university

The education system has long been a strength in France. But no longer. Progress has been made through the implementation of our first report on higher education. The same cannot be said of the primary sector, where more and more children are failing to achieve and social mobility is diminishing. In particular, almost all children identified as being in difficulty before they enter primary school at 6+ remain so afterwards. This waste of talent can ultimately be seen in the active population, with a very large number of people leaving school under-qualified: poor primary education is an obstacle to growth.

To remedy this we must:

• reinforce equal opportunities in the early years. New educational methods must be integrated into the training of nursery nurses and early-years teachers to enable children to gain the skills they need to learn to read. The training of the different professions working with the under-3s should be gradually harmonized to create a new type of early-years educator with enhanced pedagogical skills.

• reinforce the autonomy and role of school heads. Heads must be able to recruit their own teaching teams and manage their projet d’établissement [school project]. They must be able to run experiments in innovative teaching methods to improve the way all pupils learn reading and arithmetic. So, for example, experiments could start in 2011, in the form of small group workshops, several times a week, in twenty primary schools within an académie [regional education authority], then evaluated independently and, if successful, adapted and extended.

• establish effective management of human resources in education. The work of teachers must be rigorously evaluated in a way that has an influence on their career. The increase in the duties of teachers should make it possible to give pupils more individually tailored support The in-service training of teachers must be substantially improved and opportunities for a second career outside the state education system should be opened up to them.

Lastly, in accordance with the recommendations of our first report, improvements in the quality of the higher education system requires enhanced autonomy for the institutions and the reinforcement of collaborations with the wider society and business to encourage innovation. This requires universities to have stronger governance and increased freedom to recruit teaching staff and select students, in tandem with the development of external evaluation, reinforcement of multidisciplinary approaches and an internationalist vision within universities.


Preservation of the environment and management of scarce resources

In order to grow, France must invest much more than it now does in sustainable development, preserve its environment and implement an integrated strategy for the management of scarce resources. From this perspective, our country must take action in three directions:

establish proper ecological pricing by implementing a carbon tax, if possible at the European level. Proper pricing is indispensable in guiding consumer choice and improving the profitability of long-term investments in the environment;

prepare the country for the rising cost of raw materials, and in particular, secure Europe’s access to energy by enhancing the internal energy market, developing renewable energy sources and cross-border infrastructure, adapting energy pricing so as to maintain the capacity to produce the energy needed and increasing the involvement of the European Union in international negotiations concerning the regulation of raw materials. In particular, France must secure the conditions required to fund the renewal of its nuclear capacity and acquire the means to develop a strategy for the control of vital raw materials;

• make better use of our strengths in the management of scarce resources : above and beyond our established positions in the fields of water, energy and waste, France must place agriculture back at the centre of its strategy for growth, with an emphasis on research and innovation. It must also launch a proper marine policy by developing our ports and intensifying deep-water exploration.

In addition, the proposals in our first report that have not yet been implemented, notably on innovation and competitiveness, remain as important as ever.

All the country’s leaders and decision-makers must be convinced of the scale of the transformation necessary to preserve and modernize our social model, conceived during the Resistance, implemented during the Liberation, extended during the ‘Thirty Glorious Years’ and abundantly invoked since the first oil crisis.

Altogether, our proposals constitute a ten-year ambition. To succeed, this requires radical changes in the organization of the state and the relationship to risk and to democracy. It can be implemented only if it is the object of social consensus. To achieve this, we are hoping, through this report, to open up a great debate in France leading to a general mobilization. This debate requires the involvement of a maximum number of political, economic, social and cultural actors.

We are fully aware of the difficulties inherent in these transformations:

the state lacks the tools for action, since it has gradually handed over areas of control to Europe, the private sector, local and regional authorities and social dialogue; although these developments may be welcome in principle, they pose real problems for the coherence of public action;

• the social partners have not really discussed shared strategies in relation to long-term objectives. In particular, they have not discussed debt reduction, the fight against illiteracy and pollution.

sectorial interests may oppose particular reforms which are motivated by considerations of the common interest alone.

To make possible the changes described above, the Commission proposes action in four directions.

Reform political institutions so that they make it easier for the state to act : to achieve this it is necessary to clarify the responsibilities of institutions whose relationships with the government, local authorities and social protection bodies are currently too complicated. Rules leading to a return to budgetary equilibrium must be established and we must ensure that Parliament ratifies the programme for budgetary stability. Public policy must also be subject to systematic, independent evaluation, with real consequences for public spending.

Promote the acceptance of risk. Growth means taking risks. The drive to zero risk leads to zero success. Innovation must be encouraged and welcomed; the precautionary principle must be strictly circumscribed. In particular, this involves encouraging research and the entrepreneurial spirit and the fair pricing of scarce resources, the involvement of public servants in the reduction of government deficits and a more incentive-based funding of social protection – with rewards and penalties.

• Mobilize French society as a whole for the benefit of its young people. The generations now in power must bring about a massive reorientation of public choices to build a society in which future generations will be able to find work and good quality housing more easily. This requires the systematic assessment of every public decision proposed in the light of a simple criterion: is this project useful for future generations or will it make their lives more complicated?

Develop a shared European – and notably Franco-German – ambition. France and Germany are in the same boat. Neither country can come through without the other. Everything that has been said thus far must therefore, in the long term, be carried out jointly with our German partners.

The implementation of these principles should make it possible to undertake all the reforms proposed here to best effect.
• • •
Our report is completed. Its life starts here.

We are going to use our energies to explain and publicize it, to speak to political and social actors to ask for its implementation. Quickly. Sustainably.

Because we are convinced that if it is not implemented, our country will fall into decline.

Because we are convinced that it can be implemented, democratically, calmly and sustainably.

Because we did not work to ease our consciences but to open up a new path.

May the country follow it.
(pp. 239-251)



Sarkozy gets economic reform plan

International economists have presented French President Nicholas Sarkozy with a report of more than 300 proposals to "unleash" national economic growth.

BBC World News

January 23, 2008

The panel was headed by Jacques Attali, an ex-adviser to former socialist president Francois Mitterrand.

Unions and opposition politicians have attacked many of the proposals.

But Mr Attali urged the president to implement the measures rapidly. "We believe there is a limited window of opportunity to do so," he said.

The panel believes that if all the measures are implemented, French economic growth could be at least 1% higher in 2012.

And it says unemployment could be cut from 7.9% to 5%, and the number of people under the poverty line could be reduced.


In a world which is changing very fast, France is lagging behind while it has exceptional assets

Nicolas Sarkozy, French president

"Now responsibility no longer lies with us but with the government, the governing majority, parliament and all of public opinion," said Mr Attali.

Mr Sarkozy called the panel's work "remarkable" and said he agreed with most of the proposals, though Mr Attali wants the report to be adopted as a whole.

"In a world which is changing very fast, France is lagging behind while it has exceptional assets," the president said.

"I challenge anybody to say that this finding is not reasonable," he added.

Mr Sarkozy's election promise was to accelerate French economic growth, but last week the government had to revise its 2008 growth forecast down to 2%, with many economists expecting the growth to be even slower.

Mr Sarkozy has recently vetoed some unpopular measures, as some members of his UMP party don't want to upset voters ahead of March municipal elections.



Attali Commission - A Plan for the Liberation of France

Friday 01 February 2008

One of the most important reports in decades on the future of France has been presented to the French Government, but will its recommendations ever see the light of day?

The Attali Commission on Economic Growth was set up by President Sarkozy following his election in May 2007. The Commission is an iconoclastic group of 40 members of the éminence grise of France, who were told by the President to go away and come up with a programme of action to improve the level of competitiveness of the French economy.

The report of the Commission was finally unveiled last week, at a ceremony in which President Sarkozy and his leading Ministers were present. When the Commission was created, President Sarkozy somewhat imprudently and presumptuously stated that he would implement their recommendations.

When the day of reckoning came last week, he gave a general welcome to the report, but he also made it clear that he did not accept two of its key recommendations (abolition of administrative counties and removing the 'principle of precaution' from the Constitution), and that implementation of the other recommendations would be subject to achieving a wider consensus.

He was probably right to hedge his bets for the general reaction to the report has been the usual cacophony of negatisivm whenever the prospect of change is in the air. Not only has this opposition come from the usual suspects of trade unions and professional groups, but it is clear that there is a lot of concern within his own UMP party, which will cause him to sleep lightly at night.

One of the most controversial proposals is to increase the level of immigration, in order to meet labour requirements. Against the backdrop of the proposed introduction of a quota system for immigration, and a commitment by the President to deport each year around 25,000 illegal immigrants, it will be interesting to observe just how he deals with this one. He was noticeably silent on it at the release of the report.

Another controversial proposal is one to end controls on certain trades and professional occupations, notably those of taxi drivers, avocats, bailiffs, notaires, hairdressers, and chemists. There have already been howls of protests from all of these groups, so expect some moderation of the proposals to take place if the idea does ever see the light of day.

One of the central tax proposals of the Commission is to transfer employer and employee social security costs onto the general system of taxation. More specifically, by a hike in the rate of social welfare levy and VAT. Once again, the President is going to find himself in great difficulty in implementing this proposal. As one of the central promises of his election campaign was to increase the standard of living of households, it is difficult to see how this can be squared with any increase in domestic taxation.

More generally, there is also concern about a lack of coherence in the report, and its failure to address the underlying need for a greater level of investment in the economy. Many of the recommendations are rightly about tackling the regulatory indigestion under which the country suffers but, whilst the report is clear about the destination, the route to get there is less obvious.