Hollande likely to shrug off "shock therapy" review

Mon Nov 5, 2012 12:24pm GMT

By Catherine Bremer and Emmanuel Jarry

PARIS (Reuters) - French industrialist Louis Gallois called for a patriotic effort to support shock therapy to reverse declining competitiveness on Monday as he handed in a review the Socialist government commissioned but is unlikely to heed.

Gallois said his report prescribes slashing 30 billion euros ($38.54 billion) off payroll taxes and loosening labour laws to reverse a long decline in industrial competitiveness that has eaten away at exports and bled factory jobs.

The widely leaked recommendations have set frustrated industry heads against a government reluctant to shift part of the tax burden from employers to households which are already struggling with rampant unemployment and an austerity budget.

Gallois said the 22 recommendations set out in a review to be detailed to media later in the day were tough but necessary.

"The French people need to support this collective effort which could be a magnificent project for our country -- winning back our industry," he told reporters as he left the prime minister's office. "This will require real patriotism."

Industry leaders, who say shouldering some of the highest labour charges in the world puts them at a disadvantage against foreign rivals and is the cause of a ballooning trade deficit, have joined forces to demand a radical shake-up.

Gallois suggests slicing 20 billion euros off employers' social contributions and 10 billion off those paid by workers, and compensating with spending cuts and higher consumption taxes.

As the proposals leaked out in recent days, President Francois Hollande snuffed out any expectations of radical reforms by ruling out any "shock" measures.   Continued...

French President Francois Hollande arrives for the opening ceremony of the ASEM Summit in Vientiane November 5, 2012. REUTERS/Damir Sagolj
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