The economic policy lead in France by the government is going in the right direction and results are testifying of it. It would not be appropriate to change the cape. At the latest, it is necessary to proceed to institutional reforms and to some adjustments of that policy to take into account the social disease which is expressed through the “yellow shirts” movement. Such is, in substance, the message delivered last week by the president of the Republic. It is based on the last statistical publications about growth, public deficits, foreign trade and employment. In despite of that, we don’t find in these numbers enough motives of satisfaction which validate the government choices. We are not sure that this policy, even with the forecast adjustments, brings the right answers to French people worries which express themselves through poll opinions and, even marginally, in the street every Saturday.
Regarding growth, there is no reason to be enthusiast. There was a real acceleration during 2017 second half when growth rhythm was near 3% but since, it fell back to an annualized level between 1 and 1.5% and 2019 is not expected to be better if we trust last INSEE and Bank of France forecasts. The relatively good health, observed at the end of 2017, has generated a rebound of fiscal receipts and has permitted to France to come back under the 3% level of public deficit in 2018. The accounts have also benefited from the very low interest rates for several years. This has contributed to reduce the charge of the public debt. This last trend will be stronger in 2019. These factors are positive but they are, for a large part, the consequence of the European environment, regarding interest rates, and of the international one with the strong but maybe short-lived fall of oil prices. The government cannot really, take advantage of that. But the other results are much less satisfactory, especially regarding foreign trade and employment.
The philosophy which inspires for now seven years the economic policy is based on the improvement of enterprises competitiveness through a reduction of working costs and a revision of social rights supposed to weight on public expenses. To that must be added a reduction of working rights allowing more flexibility about employment. Until now, it is difficult to pretend that these dispositions have favored French companies achievements on the international market. The trade balance of goods remained heavily in deficit with during the last twelve months more than 60 billion euro. It is still growing, regarding non-energy products. Current accounts balance is close to equilibrium with a deficit in 2016 near 1% of GDP, thanks to the surplus in services and foreign financial revenues. So there is no danger for the country financial stability and that has no consequence on exchange rate because France is in the euro zone which takes advantages of massive trade surplus from others countries, especially Germany and Nederland. But that has very negative consequences on employment.
The publication of 2019 1st quarter figures of the number of jobseekers has also been presented by the government as the proof of the success of its policy. The 0.7% fall on one year, i.e. 54 000 registered persons, is indisputable. It follows a 45 000 registered persons fall during 2018 1st quarter compared with the same period during the previous year which must be added to the reduction of 70 000 registered persons during the corresponding period of the previous year. But the level is still considerable: 3.65 million for the whole France. With that rhythm, if we want to come back to a 1.65 million level for instance, it will take… forty years and it is quite an illusion to believe that at the end of 2022, France will be near full employment as someone are pretending it. In other respects, if we look at all the jobseekers, which include all these who have part time jobs and who would want to have full-time ones, the number is 5.6 million, it is poorly changing for two years and remains huge. Another point, which is rarely the purpose of public debates, shows that, in reality, the employee situation has deeply deteriorated for ten years. It is the vertiginous rise of precariousness.
The Central Agency of Social Security Systems (ACOSS) which closely follows employee situation has just published figures about recruitments characteristics. For three years, it is observed a rebound of undetermined duration contracts and a relative stability of determined duration contracts with a duration superior to one month. These data are positive but reached levels are still insufficient to compensate and to overpass the gap between the young who are arriving on the job market and these who retire. It is that point which explains the persistence of a massive unemployment. But ACOSS also reveals a very worrying phenomenon, the real blowing out of recruitment through contracts carrying a maturity inferior to one month. They went from 1.7 million in 2004 to 3.5 million in 2014 and to 4.4 million in 2019. Precariousness is generalizing in the working world with an unprecedented rhythm. It is a penalizing factor for growth and is not without link with the social disease which affects the French society. In every domain, to start with the search for a house and the quest for a loan, it is essential to have a stable employment. France is not an isolated case. The German and British apparent good figures regarding employment result, by a large share, of similar practices. But France draws a growing precariousness with a very high level of unemployment. It is difficult by satisfied by that, especially when the government explains that the solution is to work more. Affected persons would like it but they are not offered the possibility.
An activity, hotels and restaurants, massively uses it. Atop of that, it has benefited since 2009 with a superb tax break, a reduced VAT rate, which costs several billion to the State every year. But the reduction has not been passed on consumers. Price increase, regarding this profession, between January 2010 and January 2019 has been near 20% when the general evolution of the price index has been near 10%. At a time when the State is looking after new fiscal resources to finance expenditures it has announced to calm discontent, isn’t there a possibility?
An unemployment which stays very high and a increasing precariousness which concentrate themselves on the young are factors which, a top of that, deeply affect the country social cohesion. If it is added the growing heavy of taxes on pensions and the past purchasing power diminution due to their de-indexation, it is observed that a considerable part of the population is affected by the policy followed for six years, without giving tangible results. It is why the official optimism is excessive and its will to continue in the same way has few chances to reinsure and, even less, to convince.