30 JANUARY 2012

President Nicolas SARKOZY announced new measures aimed at boosting growth during a one hour television interview from the Elysée Palace yesterday evening, through job creations in the construction sector and lower labor costs « without spending a cent ». On this account, non-wage hourly labor costs will be lowered in the industrial sector to allow for domestic producers goods to regain market shares and jump start their competitive edge, in decline in the last decade due to higher wage costs compared with neighboring countries, among which export-led Germany. The measure will be financed by a VAT increase effective from October, +1.6% (but excluding the existing median and basic 7% rates), taking the current 19.6% rate to 21.2%. In addition, an extra +2% social security levy (CSG) will be applicable to financial incomes.  

Eurostat  Labor Cost Survey data show that taxes paid by employers in 2008 in France account for 2.8% of workers salaries compared with 0.1% in Germany although wages and salaries in Germany are of a larger share, 78% against France's 66.9% where wages are lower than across the Rhine river. In 2010, the data also reveal that the nominal unit labor cost index in Germany stood at 105.8 and France's was 122.7. In addition, public expenditure labor market support measures (training, job rotation and job sharing, employment incentives, supported employment and rehabilitation) in Germany were 2.52% of GDP in 2009 while France's were 2.40%. The biggest share was allotted to training in Germany while France‘s was concentrated on supported employment and rehabilitation despite a higher jobless rate, including on the long term. There exists however no minimum wage in Germany.

Regarding the construction sector, in the next three years, authorizations for dwellings requiring an extension of up to 30% of the total existing surface will be automatically granted so as to meet demand for the housing shortage while simultaneously creating jobs. Any local authority's refusal to grant permits will have to be justified. Effective from next month, a new industrial bank, dedicated to support Small and Medium companies (SMEs) will be created under the authority of OSEO, the existing state lender for larger entities, with
€ 1 billion in capital.

On youth unemployment, +2.7% increase to 455 600 job seekers in one year according to Dares December data, and 17.6% of that age group, the president announced that vocational training will be forced onto companies to take trainees so as to meet a new legal required quota of at least 5% apprenticeship or pay fines which will amount to twofold the current penalty.  

Two other measures were announced by the president, the elimination of the 35 hour working week to be negotiated through collective bargaining and the creation of a financial transaction tax, 0.1% applicable from August and including Credit Default Swaps (CDS) or credit worthiness insurance. The President specified that when Europe implements its own such tax, France will align and will join in.