France’s economic reforms do not go deep enough to halt long-term decline and may not cut unemployment from double-digit levels by the end of this decade according to the International Monetary Fund, reports The Telegraph.
The IMF called on president Francois Hollande to slow the pace of fiscal tightening next year to avoid an economic relapse, pouring cold water on claims that a fresh cycle of healthy growth is now under way.
“Given the still hesitant recovery, the government should ease the pace of adjustment,” it said in its annual healthcheck. It warned of “significant” contagion for surrounding states if French growth stalls again.
A chorus of French economists has accused Mr Hollande of wishful thinking in proclaiming the crisis to be over. Partick Artus from Natixis said recent signs of stabilisation are largely due to restocking and should be treated with great caution. “This is not recovery,” he said.
The Left-leaning Observatoire Economique said the EMU policy regime remains contractionary and risks pushing France’s economy into outright deflation next year.
The IMF said the jobless rate will rise yet further to 11.6pc in 2014 and will not drop below 10.6pc within Mr Hollande’s five-year term. If this grim scenario unfolds, it will be a political hammer blow for Mr Hollande. He asked the nation to judge him on his record in “bending the unemployment curve”.
The Fund said efforts to bring down the budget deficit should focus on spending cuts rather than fresh taxes, “which are among the highest by international standards and have a negative effect on investment and job creation”. Two-thirds of Mr Hollande’s fiscal squeeze has come from taxes, to the fury of the business lobby Medef.
The country will see an anaemic expansion in 2014 after being trapped in semi-slump for almost two years, with growth creeping up to a peak of just 1.9pc by 2018.
The IMF’s critique is gentle compared with blistering attacks on Mr Hollande by some French commentators. Nicolas Baverez called Mr Hollande the “Gamelin of economic war”, a reference to the general who relied on the Maginot Line and oversaw the collapse in 1940. “The France of 2013 is an island of immobility, suffering from lack of leadership and strategy, just as in 1940. Hollande has placed the Republic at the mercy of the National Front and the euro,” he said.
Read more of this report from The Telegraph.