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Sarkozy promises more tax cuts and labor market reform

Sarkozy promises more tax cuts and labor market reform

President Nicolas Sarkozy promised Thursday to press for further tax cuts and labor market reform to create jobs and stimulate France's flagging economy.
The pledge from Sarkozy, who took office in May, amounted to a second round of proposed economic measures. Parliament approved a first set of reforms in a special session last month.
In a speech to French business leaders, Sarkozy called for reforming the unemployment system, urged changes in European Central Bank policy and criticized France's 35-hour work week law, which he said needs to be changed.
The 35-hour work week is an "immense economic mistake," he said.
Designed in the late 1990s by a Socialist government to reduce unemployment in a sort of massive job-share scheme, the law has failed to live up to many hopes.
Business leaders and others have criticized it for reducing purchasing power and productivity. But many employees say the law has increased family time and improved quality of life.
At the annual meeting of the French employer's federation, Medef, in Jouy-en-Josas, Sarkozy said he wanted to cut taxes further to boost purchasing power.
"In the world of today, directly taxing production, work and capital is to condemn us to less work, less production, less growth, less purchasing power," he said.
Sarkozy's conservatives control both houses of parliament.
Taxation is a sensitive subject in France. Rock star Johnny Hallyday disappointed fans but illustrated a point being made by his friend Sarkozy when he moved to Switzerland last year to escape high taxes.
Lawmakers voted last month to lower the maximum tax rate from 60 percent to 50 percent of income, and cut taxes on overtime pay, in an effort to encourage people to work more than 35 hours per week.
"The first 100 days of the new French government have been active, even hyperactive," said Thorsten Polleit, an economist at Barclays Capital in Frankfurt.
"They are trying to push things and they are very optimistic as far as change is concerned," he said. "Sooner or later they might realize that changes are hard to implement."
Turmoil in world markets has revived French fears of globalization and dampened their enthusiasm for Sarkozy's market-friendly reforms.
Earlier this month, central banks around the globe flooded markets with liquidity to prevent a credit crunch. As defaults on loans linked to mortgages offered to people with poor credit ratings increased, banks reined in lending to protect themselves from loans linked to these mortgages.
Sarkozy called on French banks not to tighten lending conditions "to compensate for excessive risks they've taken on financial markets."
French economic growth slowed in the second quarter as business investment faltered, denting hopes of a strong European recovery and reducing the French government's room for maneuver in reining in the deficit.
Sarkozy repeated calls for ECB President Jean-Claude Trichet to do more to help exporters suffering from the strength of the euro.


Updated : 2021-03-09 00:42 GMT+08:00