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Hollande unveils reforms to help France's hard-up

AFP/The Local · 20 Aug 2014, 13:57

Published: 20 Aug 2014 13:57 GMT+02:00

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In an interview with Le Monde daily, Hollande promised to stick with the key plank of his economic policy - the Responsibility Pact - in the face of criticism across the political spectrum.

The Responsibility Pact offers businesses tax breaks of some €40 billion ($55 billion) in exchange for a pledge by companies to create 500,000 jobs over three years.

Hollande plans to finance this with €50 billion in spending cuts.

"I have set out a way forward. That is the Responsibility Pact," Hollande said.

"The aim is clear: to modernise our economy by improving competitiveness and supporting investment and jobs. The fact that the economy is today slower in Europe and in France does not mean that we should give up on this," he said.

"On the contrary, we need to go faster and further."

He added that any "zig-zag" would "make our policy incomprehensible and would not produce results."

Hollande said his Economy Minister Arnaud Montebourg would soon present "draft legislation on purchasing power which aims to boost competition for services offered to consumers."

The president did not provide detailed measures but said they would include an attempt to simplify construction permits and reform restrictive laws on Sunday shopping.

On fiscal policy, Hollande said the government would "simplify and make fairer the income tax levels for the ... low-income taxpayers."

Hollande also announced plans to unify two social benefits for those who earn little or are in and out of work - the "prime pour l'emploi" (PPE) tax credit and the "RSA activité" allowance, to create one single payment for the most hard-up workers in a bid to "to promote a return to work and improve the pay of employees in a precarious situation".

The reform is set to make up for the fact France's constitutional court slapped down a key plank of the Responsibility Pact that would have reduced social charges for low-income employees aimed at putting more money in workers' pockets.

Story continues below…

On Wednesday, the deeply unpopular Hollande held his first cabinet meeting since the end of the long summer holiday in France, with his government under severe pressure, particularly in terms of economic growth.

The French national statistics office said last week that the economy had stagnated in the first six months of the year, forcing the government to halve its forecast for growth this year to 0.5 percent.

Paris also said its deficit would be "around four percent" of gross domestic product this year, an upwards revision from the 3.8 percent forecast previously.

European Union rules state that countries should not have a public deficit above three percent of GDP.

AFP/The Local (ben.mcpartland@thelocal.com)

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