France: des défis mais une fenêtre de tir incroyable pour réformer – Deutsche Bank

Gilles Moec, économiste chez Deutsche Bank, a publié une étude fouillée sur la situation de l’économie française, dans laquelle il estime que la France dispose d’une période idéale pour réformer (pas d’échéance électorale majeure avant 4 ans) en s’attaquant aux problèmes de fond du modèle français: marché du travail trop rigide, besoin de plus de flexi-sécurité, réforme fiscale. Cela passera par des phases difficiles (augmentation du chômage) et de volatilité sur les marchés. Mais c’est le prix à payer pour remettre le pays en ordre de marche et rattraper le retard sur l’Allemagne.

Le résumé de l’étude:

« By focusing on traditional left themes during the presidential campaign, French President Francois Hollande drew some unflattering comparisons with previous European centre-left leaders, such as Tony Blair or Gerhard Schroeder, who embraced more gingerly supply-side reforms. Actually, since his coming to power, Hollande’s signals to the market have been mixed, but in our view they were on balance tilted towards a more reformist and fiscally orthodox stance than expected. True, the budget bill for 2013, with its focus on higher taxes, together with the (partial) revision of the pension reform are causes for concern. Still, we think that the reaffirmed commitment to fiscal discipline, together with the “competitiveness pact” are important steps in the right direction.
We believe the challenges are daunting though. We see the macroeconomic projections on which the French fiscal consolidation strategy hinges as overoptimistic. Indeed, these forecasts in our view do not sufficiently take into account the negative feedback loop from the restrictive fiscal stance. Furthermore, the corporate sector, in a context of historically low profitability, is forced into wage austerity and labour shedding. This will impair consumer spending, in a country where households’ saving behaviour is often pro-cyclical. Finally, the cumulated loss of competitiveness and an unfavourable geographical specialization will limit the impact on France of the recovery in global demand which we expect from Q2 2013 onwards, once the uncertainty in the US and China resolves. French banks’ better attitude towards lending – while credit standards continue to tighten in the Euro area as a whole – will provide a cushion, but we expect GDP growth to fall short of the acceleration to 2.0% by 2014 projected by the government.
The “competitiveness pact” is positive, but we expect the government’s take on labour market deregulation – on which it is likely to legislate in early 2013 after the current round of negotiations – to fall short of the positive shock engineered in Germany in 2003 by the “agenda 2010”. More will be needed. The current combination of strong employment protection (for those with indefinite contracts) and generous unemployment benefits is unsustainable in our view. A move towards “flex-security”, with a less rigid labour market in exchange for decent protection in case of job loss, is the likely way forward for France, but it may take some prodding by market forces or a protracted period of high unemployment, to get there.
We do not expect France to be an engine of growth in Europe in the next few years. Sub-par growth will make the attainment of the official fiscal targets difficult. Actually, the Schroeder experience -Germany failed to stick to the European fiscal rules for 5 consecutive years – suggests that it is very difficult to deliver at the same time fiscal discipline and structural reforms without endangering the political acceptability of the package by precipitating a sizeable recession. We think that some leeway on the headline fiscal targets will be needed for France. Still, this will be “sellable” to the market and France’s peers only if beyond the labour market reforms, a clear commitment to structural spending cuts is observed. The commitment exists, but there is a striking lack of precision on the actual measures to be taken.
On balance, we think that France will deliver, if in a somewhat patchy, “stop and go” way which may give way to moments of market volatility. It is in Hollande’s political interest to implement the unpopular reforms at the beginning of his mandate. Unless Schroeder, who had less than 2 years between the acceleration in the reformist drive of 2003 and the early elections of 2005, Hollande still has more than 4 full years for the positive impact of the reforms to materialise. »

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