French President Shifts Economic Policy as Economy Stagnates

January 14, 2016Franceby EW News Desk Team

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President Francois Hollande announced that new business-friendly policies intended to strengthen the economy. The socialist president entered office in 2012 on a campaign of taxing the wealthy to sustain growth. On New Year's Eve, Hollande declared an economic state of emergency pertaining to slow growth and high unemployment. The president will release more details of the measures on Monday.

The president finds himself in a tough spot as his economic team quarrels over various solutions for the economy. Economy Minister Emmanuel Macron and other cabinet members champion a market-oriented approach, while lawmakers further to the left wish to see more policies aimed at the working class. With that, the free market measures introduced so far have not worked, despite reassurances from the government, and Hollande is running out of time.

He has thus far failed to deliver on many promises, and he vowed not to seek reelection if he failed to address the unemployment situation. Currently, the jobless rate remains over 10 percent, but Hollande is unlikely to resign anytime soon. However, the amount of people unemployed will continue to constitute a barrier to economic progress and will remain a blemish on his legacy if left unabated.

New Reforms

Details of the new policies remain scant, but some of the new mandates include relaxing labor laws for employers and capping compensation packages for employees that are unfairly terminated. This business-oriented direction has been going on since 2013, when the president cut taxes by $40 billion and slashed government spending. Hollande originally proposed an idea of taxing millionaires by 75 percent to pay for jobs for young people, but he was forced to take a slight turn to the right after his hard-liner policies failed to gain traction.

The government wants to create new jobs by taking a different path, but analysts remain skeptical of the new approaches, and Hollande risks isolating the left. The new policies have not gone over well with his fellow leftists, forcing the president to appease them by proposing infrastructure spending and job training programs.

Hollande in Deep Water

Hollande is trying to appease his base to prevent a far-left candidate from running against him, but the left is already unhappy with his shift in policy, and these new proposals will not win over any new fans on his side of the isle. Moreover, some members of his party have expressed dissatisfaction with increased security throughout France after the Paris attacks, including the president's request to the government for special powers to fight terrorism.

Overall, Hollande's political career remains in jeopardy as little progress has been made on the economic front, and even though France made gains in certain areas of the economy, leaders do not have enough structural reform measures in place to get the economy up to par.

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