Sarkozy sets out plan to boost French economy

French President Nicolas Sarkozy has laid out plans to rejuvenate his country’s flagging economy and boost employment in the run-up to elections in April in which he is expected to seek a second term.

In a televised address on Sunday, Sarkozy announced a flurry of measures which he said would boost competitiveness, largely paid for by raising the rate of consumption tax in a bid to ease fees paid by employers and keep jobs in the country.

He told viewers that the worst of the economic crisis had passed: “The financial crisis is calming down. Europe is no longer on the edge of an abyss. All our efforts must now be dedicated to the resolution of the economic crisis.”

Sarkozy, who is running far behind Francois Hollande, the Socialist challenger in opinion polls for the election, said taxes on goods and services needed to rise and that he would use the money to reduce the burden on French companies, allowing them to hire more staff.

Value-added tax

The president said he would raise the value-added tax (VAT) rate to 21.2 per cent from 19.6 per cent from October to fund a reduction in social charges on companies.

In what he called his “Social VAT” plan he said: “I am convinced this decision will save jobs and that it’s the only credible way to stop outsourcing.”

Sarkozy also pledged to set up an industrial investment bank in February with a billion euros in capital that will lend to small and medium-sized businesses struggling to obtain credit under current economic conditions.

In addition, he said companies with more than 250 employees would be obliged to take on interns to the level of five per cent of total staff, as a way of helping reduce chronic youth unemployment.

Sarkozy also called for more flexible working practices, potentially allowing employees and companies to opt out of France’s 35-hour working week.

“If a majority of employees in a firm agrees directly with the managers to decide their hours of work, to favour work over salary or the salary over work, they can do it. This agreement by the firm will be by law and in the individual’s contract,” he said.

While the reforms appeared aimed at narrowing a competitiveness gap with Germany that is weighing on French growth, Sarkozy’s televised announcement could anger potential voters.

Sarkozy, who hopes to push the package of reforms through parliament prior to April’s vote, has yet to confirm his intention to run for office and has until the middle of March to do so.

But he said he had a duty as president to hold off announcing his re-election bid until as late as possible.