France should rein in public spending, ease rules on firing and review corporate taxes, business executives said, as the economy becomes a central issue of presidential election starting next month.
Excessive public spending and taxes create “a vicious circle for competitiveness,” Alstom SA (ALO) Chief Executive Officer Patrick Kron, said in Paris today at a conference organized by newspaper Le Monde and the French Association of Private Companies.
Taxes levied on French companies account for about 24 percent of the France’s gross domestic product, compared about 15 percent in the U.K. and Germany, Laurence Parisot, the head of Medef, France’s biggest business federation, said today. She also called for quicker and sounder legal rules for layoff proceedings to reassure foreign investors.
Socialist candidate Francois Hollande, who has been leading against President Nicolas Sarkozy in opinion polls ahead of the April-May presidential elections, has pledged to raise levies on companies and households by 29 billion euros ($38 billion) by 2017 to fund new spending and erase the deficit. Sarkozy has said that he’ll create a new levy to ensure large French companies pay a minimum amount of tax.
Europe should adopt government procurement rules that could help its companies in a way similar to the U.S., Alstom’s Kron said, backing Sarkozy’s call for a “Buy European Act.”
France’s next president will face an unemployment rate which was 9.8 percent in the fourth quarter, and a public deficit which held at 5.3 percent or 5.4 percent of gross domestic product in 2011, according to Sarkozy. Hollande has pledged to erase the deficit by 2017, a year later than Sarkozy.
French government expenditure accounted for 56.6 percent of GDP in 2010, six percentage points higher than the average of the 27-nation European Union, according to the region’s statistics office Eurostat. Only Denmark and Ireland had higher ratios that year.
“Nobody’s addressing the fundamental issue which is: why do we spend so much,” Maurice Levy, CEO of Publicis Groupe SA (PUB), the third-largest advertising agency, said in an interview. Levy is also the chairman of the French Association of Private Companies.
“You must have more flexibility on the labor market,” said Gerhard Cromme, chairman of the supervisory boards of ThyssenKrupp AG (TKA), Germany’s largest steelmaker, and of Siemens AG (SIE), Europe’s largest engineering company. He also praised the “partnership” between German business leaders and unions.
Sarkozy announced an increase in the value-added sales tax in January to fund a cut on labor taxes paid by companies in a bid to make them more competitive, emulating German efforts in the past decade.
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