The Challenge of Reforming France

Nicolas de Boisgrollier
Nicolas de Boisgrollier Visiting Fellow, Center on the United States and Europe, The Brookings Institution

April 1, 2006

France is an economic success story. It is the sixth largest economy in the world, the fourth biggest exporter of services and the third largest investor abroad. All the main macroeconomic indicators have improved in the past 12 months. 2005 was a year of record profits for the forty leading French corporations. Beyond well known consumer and luxury goods companies like L’Oréal and LVMH, French companies are international leaders in sectors such as nuclear technology (Areva) and communications (Alcatel). Not bad for a country of fewer than 63 million people who do not always enjoy a reputation for hard work.

Nevertheless, there are some worrying economic and social issues. The French welfare system no longer seems sustainable in the face of demographic pressure, mounting debt, and persistent unemployment. The riots in the poorer suburbs of Paris in November 2005 gave some hint of how disenfranchised one growing segment of the population has become. At the same time, even fairly modest reforms, such as the proposed CPE (Contrat Première Embauche or First Employment Contract) intended to reduce youth unemployment, provoked massive demonstrations and nationwide strikes. Such measures are often withdrawn or scaled back under pressure. What former Prime Minister Edouard Balladur said about his would-be youth labor law in 1994 could have been said by Prime Minister Dominique de Villepin in April 2006 about his own attempt: “I would like to see an end to the sort of hypocrisy that consists in lamenting youth unemployment while criticizing every single measure we are trying to take.” Finding a way to move past this societal blockage will be one of the key issues in the 2007 presidential elections in France.

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