France acts to bolster industry

Tue Nov 6, 2012 11:22am GMT

By Emmanuel Jarry

PARIS (Reuters) - France's Socialist government unveiled measures to bolster the struggling industrial sector and make exporters more competitive but Tuesday's package fell short of the shock therapy industry leaders are urging.

Prime Minister Jean-Marc Ayrault proposed new incentives for investment in innovation, small businesses and training and tax credits for companies keeping jobs in France, as a way of easing their costs in the current downturn.

Measures included 20 billion euros in tax credits over three years, an extra 10 billion euros in public spending cuts and a 10 billion euros increase in consumer taxes, two-thirds of which would be in VAT sales tax from January 1, 2014.

Yet the package is not expected to attack the high payroll taxes that business leaders say keep them at a competitive disadvantage against foreign rivals and are a factor in their waning share of global export markets.

In a government-commissioned report submitted on Monday, Industrialist Louis Gallois called for payroll taxes to be slashed by 30 billion euros ($38.35 billion) within two years, with the difference made up by higher consumer taxes, to deliver the shock" the business sector needs.

President Francois Hollande, criticised in opinion polls for being too timid in tackling the economic crisis, has said he prefers a steady path to better competitiveness to shock therapy.

"What the French economy needs is not a shock but therapy, a deep therapy, a drawn-out therapy," Finance Minister Pierre Moscovici told BFM television late on Monday.

Moscovici said the government would apply many of the 22 proposals in the Gallois report and spread them out over its five-year term to avoid a sudden jolt in consumption taxes that might hit households and stifle spending.   Continued...

French Prime Minister Jean-Marc Ayrault speaks during a news conference to outline the Socialist government's plans for restoring industrial competitiveness in response to Gallois' commissioned report at the Hotel Matignon offices in Paris November 6, 2012. REUTERS/Philippe Wojazer
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